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Chapter #25

Under the new bankruptcy law effective October 17, 2005, divorce and support obligations are NOT DISCHARGEABLE. Therefore, do your bankruptcy before you get obligated to pay debts in a marital settlement agreement.

The old way was to get a divorce and agree "each will pay their own bills" or "husband agrees to pay certain debts". That is nonsense: don't do it. Divorcing couples should think about joint bankruptcy to eliminate who is going to pay debt as an issue in the divorce.

Divorce includes not only dissolution of a marriage, but financial settlements and obligations for things such as child support, alimony or maintenance, attorney fees, and agreements to be responsible for marital debts.

If you have signed an agreement with a spouse to pay alimony and to be responsible to pay debts, that agreement to pay debts may not be dischargeable in bankruptcy. Because your ex-spouse was in need of support, the agreement to pay her bills, or joint marital bills that she was liable for, may be considered to be a debt to her in the nature of support, and those debts are not dischargeable under Federal bankruptcy law.

Child support, alimony, and property settlement obligations under divorce judgments, especially if the other spouse could have gotten maintenance or alimony instead of the promise by the other spouse to pay certain debts, are not dischargeable in a Chapter 7.

Therefore, if you and your spouse are contemplating divorce, and one of the issues is, "Who will pay the debts?" A good answer to that question might be: "No one." Why should either of you pay them if there is no money to do so, when you could file a joint Chapter 7 case and have no debt?

Instead of arguing over who will pay it, solve the problem with a joint bankruptcy. If your spouse will not agree, you can do a bankruptcy without your spouse. Just because you are married, it does not mean that you have to file a joint Chapter 7 or Chapter 13. Once you have gotten rid of your debt, your spouse may decide that it would be wise to do the same thing, and you will have eliminated an important issue in the divorce. The spouse could still ask the divorce court judge to make you pay bills you have discharged in bankruptcy, but that is very rare, especially if your spouse is working.

If you have already agreed in a divorce decree to pay bills incurred during the marriage, and the spouse you divorced is working and did not need alimony, you may be able to discharge both your obligation under the divorce decree, and your obligation to the creditors. Your spouse may be considered just another judgment creditor. I have seen many cases where both parties are working, yet one agrees to pay all the debt just to settle the case. So, if you have already gotten a bad deal in a divorce, you may be able to reverse it in a bankruptcy.

This advice may change if the law changes. There is a case involving these principles which is scheduled to be heard by the United States Supreme Court in July, 1991, so you must get advice from an experienced bankruptcy attorney if these issues are present in your situation, and no attorney can guarantee the outcome when you are dealing with divorce judgments.

Generally, the rule is that child support, and debts which are in the nature of alimony or maintenance, are not dischargeable. The law is very complicated in this area, and depends on the facts in each case.

If you are involved in a divorce case, you should consult your divorce lawyer first. Do not go to a bankruptcy lawyer without telling him or her that you have a divorce lawyer. Some divorce attorneys are familiar with bankruptcy law and can advise you, but I get a lot of referrals from divorce attorneys who want me to represent their clients in bankruptcies. Debts you agree to pay in a divorce survive a bankruptcy.

If you are on speaking terms with your spouse, and even if you are not, it may be to your advantage to do a bankruptcy before you get a divorce. I seem to have a lot less trouble that way. The other spouse is then encouraged to do a bankruptcy, instead of devoting their efforts toward making you pay bills you obviously can't pay. A divorce judge can order you to pay bills anyway, even after a bankruptcy, but this is rarely done.

After you have a judgment ordering you to pay bills incurred before a divorce, it may or may not be something a bankruptcy can't help you with, so, if at all possible, see the Law Offices of Peter Francis Geraci before you have a divorce judgment. If you already have one, bring it in. You need special advice regarding divorce and bankruptcy, and must bring not only your bills, but your divorce settlement and judgment to the bankruptcy lawyer.

Problem: Joe and Elizabeth are getting divorced. They have no children, but they have 14 joint credit cards totaling over $16,000 in debt. Joe makes more money than does Elizabeth, so she wants him to assume responsibility for all the bills after the divorce. The payments are so high, however, that Joe will not be able to keep up his car payment if he has to pay all the credit cards.

The Peter Francis Geraci Chapter 7 or 13 Solution: If they file a joint bankruptcy just before they are divorced, neither one will have to pay any bills and they will both start fresh. Joe can keep making his car payment and keep his car.