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Can I Discharge Any Debt in a Divorce Decree?

Can I Discharge Any Debt in a Divorce Decree?

A lot of people who choose to come see us for filing for bankruptcy have already been divorced. There are certain debts in the Divorce Decree that cannot be discharged no matter what and other debts which can only be discharged in a chapter 13.

A typical divorce decree will spell out child support obligations and alimony. It will also spell out who is responsible for each debt. The divorce decree also divides up the property among the couple getting divorced.

11 USC 523(a)(5) states that a domestic support obligation(DSO) cannot be discharged in a bankruptcy. 11 USC 523(a)(15) states that debt incurred in a divorce is not dischargeable.

However 11 USC 1328 (a) states that all debts will be discharged except certain debts listed specifically in 11USC1328. Domestic Support Obligation is specifically listed in 11USC1328 as a debt that is not dischargeable, but it leaves out the property division.

This means that if you file a Chapter 7 bankruptcy, you will not be discharged of any debt incurred in a divorce decree or separation agreement. But if you file a chapter 13, you will be discharged of your property division debt.

Oftentimes, a Domestic Relations Court will spell out whether the debt is a DSO or a property division debt. But in the rare time it doesn't, the bankruptcy court may need to decide this if the debtor files a chapter 13.

The reason for this is if you are filing a chapter 13 bankruptcy to get rid all of your debt incurred in the divorce, you will need to know if it is a property division or a DSO.

The way the Court looks at the debt is by asking "Was the Ex-Spouse required to pay this debt to support the spouse or was it for some other reason?" An example of this would be where the ex-wife still lives in the house and the ex-husband moved out. The ex-husband(who filed for chapter 13 bankruptcy) is required to make the mortgage payment on the house. This can be construed to mean that this mortgage payment is to support his ex-wife so she has a home to live in. So the Bankruptcy Court would say this is a DSO and thus not dischargeable.

Another example would be where the ex-husband is required to pay part of the ex-wife's credit card debt and the ex-husband filed for chapter 13 Bankruptcy. This is clearly a property division because it doesn't appear the payments are meant to support the ex-wife. So the husband would be discharged of that debt in a chapter 13 but not in a chapter 7.

So the answer to the question in this blog is there are no debts pursuant to a divorce decree dischargeable in a chapter 7. But the property division debts are dischargeable in a chapter 13.

It is often recommended if you are getting divorced, you should file a chapter 7 first. But if you don't make sure your divorce attorney clearly states in the separation agreement or divorce decree which debts are DSO and which debts are property division. That way if you decide you ever need to file for bankruptcy, you will know which Chapter is best for you.

To learn more about this, contact Bates and Hausen, LLC where we have over 50 years of combined experience in bankruptcy.

Submitted March 2, 2015.

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