Divorce during Bankruptcy

[AllHosedUp]

So, I filed a Chapter 13 bankruptcy around the end of December and am awaiting my conf. meeting. After the plan is confirmed, my wife and I are going to seriously consider divorce. (I'm in Louisiana, a community property state) If we were to split, and I was to completely take over the plan payments, would the trustee likely increase my payments as I would lose a dependant? I don't want to stay in a marriage with a person I can't trust just to be able to afford the monthly chapter 13 payment...

[bige1030]

Do you make most of the money in the relationship? If so, you probably will see an increased payment due to expenses going down.

[AllHosedUp]

Unfortunately I make 4/5 of our $$$. The problem is the trusee is taking 2/5 of our $$$ already. I figured that if I offered to take the entire 13 in a divorce settlement that they might leave the amount the same as I would no doubt be paying alimony. I'll probably ask my bk atty. as soon as the conf. meeting is done. He's pretty slow to get back to me though, so I thought I'd pick the community's brain.

[HHM]

Just to clarify, was this a Joint BK, or you only?

[AllHosedUp]

We jointly filed a Chapter 13 Bankruptcy in December on about 70K of unsecured cc debt that my dear faithful spouse hid from me in this glorious community property no fault state. Just the unsecured cc debt and student loans are in the plan.

[HHM]

Honestly, I am not sure how a divorce, during a chapter 13 plan, effects the BK. I am not sure you can just "assume" the chapter 13 payments in a Divorce Decree because it was a joint BK filing. Plus, you open yourself up to all sorts of problems if you don't complete the plan, i.e. if the case is dismissed, because both you and your ex are on the hook for the debts...for example, if the chapter 13 does not go to discharge, and it is dismissed, now you're obligated to pay the chapter 13 plan (and ergo the included debt) because it is part of a Domestic Decree, and therefore, no longer dischargeable in BK. What happens if you need to convert to a chapter 7...you won't be able to jointly, because you are no longer married, and again, you now have this non-dischargeable domestic decree putting you on the hook for all the debt.

You are going to have to get some really good legal advice, and I bet even most lawyers won't know how this plays out. What you will probably end up having to do is voluntarily dismiss the current chapter 13, wait the 6 months to refile, in that time, get your divorce, then refile (and perhaps you can do a 7 at that point).

[AllHosedUp]

I'd be worried that if we dismissed and filed for divorce, that the debt would be split between us. Once it is, I'd file for a 13 and she for a 7. Her debt would be discharged and her creditors would come knocking on my door. (Community property state) I'd be up a creek without a paddle, well even more so than now...

[AllHosedUp]

[HoglundLaw]

Debts owed to exes through a provision in a hold-harmless provision in a divorce

Debts owed to ex-spouses through a provision in a hold-harmless provision in a divorce decree are automatically non-dischargeable in a bankruptcy filing, according to a court ruling.

A recent Court of Appeals decision (In re the Marriage of: Jason Paul East vs. Yvette Francis East, File No. 74-FX-05-000284) provides that the ex-spouse of an individual filing a bankruptcy does not need to make a formal objections to the discharge of obligations assigned to the filing former spouse through a marriage separation or dissolution proceeding. In others word, a hold-harmless obligation in the favor of a former spouse automatically can not be discharge through the bankruptcy.

The court stated that language used in the exception to discharge set forth in the Bankruptcy code, 11 U.S.C. Section 523(a)(15)(2006) is clear and should be interpreted as written.

The court also found the an aggrieved former spouse does not need to participate in the bankruptcy since the nondischargeablity of the debts outlined in a hold-harmless clause is automatic. The former spouse does not need to file an objection in the bankruptcy.

This case emphasizes the bankruptcy court’s limited ability power to undo the decisions made in a family court. A Chapter 7 Bankruptcy Proceeding can not provide relief for a debtor assigned debt through his divorce.

This decision should cause family law practitioners to pay special attention to the issue of debt assignment in a separation or dissolution proceeding.