Divorce Debts Get Different Treatment in Bankruptcy

Bankruptcy treats debts that were incurred in the course of a divorce or legal separation differently than run of the mill third party debts. The most common kinds of debts incurred during divorce are 1) the obligation of one spouse to pay the other a sum of money in connection with division of the marital property; and 2) the obligation to protect the other spouse from the debts to third parties awarded to the debtor for payment.

Section 523(a)(15) of the Bankruptcy Code makes debts incurred in divorce non dischargeablein Chapter 7 and Chapter 11 cases. Gone, in the amended bankruptcy code, is the provision that called for a weighing of the hardships that discharge might impose on the non debtor spouse. Such debts are now flat-out non dischargeable.

The distinction to be noted is that the debtor can discharge the obligation to Big Credit Card Company, awarded to him for payment in the divorce, but he can’t discharge his obligation to his ex to hold her harmless should Big Credit Card Company sue her for the debt.

In Chapter 13, however, those debts are dischargeable, without debate.

In every chapter in the bankruptcy code, spousal support, alimony and child support are non dischargeable.

Technorati Tags: bankruptcy, property settlement, divorce, debt, indemnification

Popularity: 3% [?]