Bankruptcy Discharges And QDROs

19 Mar Bankruptcy Discharges And QDROs

QDRO: That nasty Qualified Domestic Relations Order that divvies-up a pension after a divorce.

Bankruptcy: That other nasty procedure that may, or may not, get rid of all your debts.

Okay, listen up. No bankruptcy can get rid of a family support order. Property divisions, including pension divisions,are different. Chapter 7 cannot discharge a property division ordered by a divorce court, but Chapter 13 can.

So, is a QDRO a property division ordered by a divorce court? Maybe. It depends on your timing.

My experience is that there’s a couple of months after the divorce court orders the parties to execute a QDRO and present it to that court, but before all that actually happens. (QDROs are extremely complicated. They are not usually prepared by your divorce attorney but by another specialist.)

After the QDRO is signed by everyone including the probate judge, the rights to the pension are written in stoneand cannot be changed. We call them present ownershipinterests as opposed to a future claim to payment. But before the QDRO is signed by all parties, and then approved by the divorce judge, – before all that happens, there may be a window of opportunity here. An opportunity to discharge the obligation to sign the QDRO and present it to the pension administrator. An opportunity. A possible opportunity.

That ex-spouse’s future-right-to-payment claim (not present ownershipinterest) in your pension might be dischargeable in a Chapter 13 case. Courts differ in their interpretations and descriptions of what right that ex-spouse has before the QDRO is final. Some call the ex-spouse a creditor with a claim that can be discharged. Some call the ex-spouse a beneficiary of a constructive trust which interest cannot be discharged.

There’s a lot of money at stake. Not every attorney knows this area enough to successfully advocate for your position. Ask around for recommendations.

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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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