Bankruptcy and Divorce Obligations

02 Oct Bankruptcy and Divorce Obligations

Bankruptcy and divorce law do not always play well together. Here’s how it looks after the October, 2005 reforms.

Child custody and visitation: Not affected at all by bankruptcy. No change from prior law. (Bankruptcy is only about money, folks.)

Child support and alimony: (Called a Domestic Support Obligation, or DSO.) Not discharged in either Chapter 7 or 13. Moreover, one cannot receive a Chapter 13 discharge for any debt unless all past due support is caught up in the case. (You can get a discharge of other debts in Chapter 7, and you can still use Chapter 13 to stop a foreclosure and catch up on the missed payments, however. You just don’t get a discharge.) The trustee in either case must give special notices to the child support/DSO creditor.

Property division obligations, including marital debt assumptions: Not discharged in Chapter 7; is discharged in Chapter 13.

Real estate transfers before bankruptcy: In the First Circuit region of New England (but not Connecticut) and Puerto Rico at least, a pre-bankruptcy transfer of real estate, by a bankrupt to a former spouse pursuant to a probate court order, cannot be attacked as a fraudulent transfer. (A trustee can reverse a fraudulent transfer, where the bankrupt did not receive fair value in return, for the benefit of the bankrupt’s creditors.) The court ruled that this kind of transfer was to a co-owner and not on account of a debt, requirements for the definition of a fraudulent transfer.Ford v. Skorich (In re Ford), 482 F.3d 21 (CA 1 2007).

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L. Jed Berliner practices exclusively in consumer bankruptcy, foreclosure defense, and related consumer protection litigation such as credit card defenses and suing debt collectors. He established his Springfield, MA practice in 1988. Attorney Berliner is a regular and active contributor to the Bankruptcy Law Network, the Bankruptcy Roundtable, and the National Association of Consumer Bankruptcy Attorneys, three specialized consumer bankruptcy forums on the Internet, and is an informal mentor to regional practitioners. He is recognized by his peers as an expert in consumer bankruptcy issues. He thoroughly enjoys being rated "excellent" in his client surveys.

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