29 Sep Bankruptcy Automatic Stay Not Affected by Non-Dischargability
Divorce attorneys like to insert language in the divorce agreements or decrees reciting that certain obligations are not dischargeable in a subsequent bankruptcy case by one of the ex-spouses. Now there may be differing opinions on what parts of a divorce decree are or are not dischargeable in a bankruptcy, but such language does not mean that the automatic stay of a bankruptcy filing does not apply. A bankruptcy case will stop actions to enforce collectibility of a divorce decree.
Recently, I was involved in a case where a divorce attorney threatened an ex-spouse with “arrest” if she did not show at a contempt hearing even after being warned of the filing of a bankruptcy case more than three times. The attorney did not believe that there was anything wrong with that action because the divorce agreement provided that the underlying debt to an ex-mother-in-law would be non-dischargeable in a bankruptcy case. In an affront to the U.S. Bankruptcy Court, the attorney insisted on going forward with the divorce court hearing up until the last minute.
The automatic stay of the bankruptcy filing protected the ex-spouse debtor from prosecution in the divorce case. The attorney was cited with contempt and sanctions awarded in favor of the debtor. The parties will now litigate the issue of discharge of the divorce provisions in the Bankruptcy Court and the divorce court’s action will have to wait for the decision of the Bankruptcy Court. Whether the debtor will ultimately have to pay on the divorce judgment has nothing to do with whether the debtor is protected by the bankruptcy filing.