Bankruptcy & Divorce

The following materials are perhaps more suited for attorneys but can be useful for everyone.

NOTE: You may email any questions that you have about bankruptcy to the author of the following materials at calh@gate.net

A filing under Chapter 7 of the Bankruptcy code is called liquidation. It is the most common type of bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. After a bankruptcy proceeding is filed, for the most part, creditors may not seek to collect their debts outside of the proceeding.

Marital Dissolution obligations not within Statute 523(a)(5).

1. It is the debtor's burden to establish that the debt is not alimony or support. 2. It is the debtor’s burden to show that debt should be discharged. 3. It is Court's option to look at debtor income at the time of trial or to look ahead at debtor’s potential ability to pay debt. 4. It is a split of authority as to whether it is permissible to partially discharge a Stature 523(a) (15) debt. 5. Statue of Limitations- Statute 523(a)(15) must be filed no later then (60) days after the first date of the meeting of creditors (341 meeting) see Rule 4007 for Motions to extend deadline for complaints objecting to the dischargeability of certain debts.

Discharge and Dischargeability

A. Certain bad acts my result in a judgment denying discharge of debts under Statute 727. B. Issues relating to discharge in family court cases are covered by Statute 523. C. Statute (a)(5) and (b) - exempts discharge of alimony, maintenance and child support. This section also covers attorney’s fee involving the above matters. D. Application Statute 523(a)(5) 1. Federal Law determines what constitutes alimony, maintenance or support. The Court may look to State law for evidence. 2. The label given to the financial payment in the settlement agreement or Court Order is not determative of the nature of the payment. In Re Harrell, 754 F 2d 902 (11th Cir. 1985) 3. The Court must determine whether the financial obligation is in the nature of support or property settlement. 4. Factors to consider: a. Whether the obligation is subject to termination or reduction upon the occurrence of certain events. b. Was the payment to balance disparate in the income of the parties. c. Was the obligation payable in installment or in a lump sum. d. Are minor children involved requiring support. e. Respective physical health, and education of the spouses. f. Was there a need for support at the time of the case. In Re Kodel, 105 B.R. 729 (BankR. S.D. Fla 1989).

Bankruptcy concepts and terms.

1. Statute 541- Property of the estate.
1. Post petition earnings (except in chapter 13).
2. Property exempt from execution of a Judgment by creditors, is also Not property of the estate.
3. Florida Law allows the following exemptions: a. Household goods & personal property -$1,000.00 per debtor -Art. X. Sec. 4(a)(2) Const.of St. FL. b. Homestead - All - Art X Sec. 4(a)(1) Cost. of St. FL. c. Disposable earnings of head of family - $500.00 per week- Florida Statue. Sec. 222.11(2)(a) and (b) 1993. d. Automobile- $1,000.00 per Debtor.- Florida Statute Sec. 222.25(1) (1993). e. Annuity Contracts - All - Florida Statutes Sec. 222.25 (z) (1993). f. Life Insurance. Cash surrender - Up to $8,000.00- Fla. St. Sec. 222.14 (1978). g. Pension/Retirement Benefits - All - Fla Statute 222.25(z) (1993). h. Prof. Prescription Health Aids- All i. Disability Insurance Benefits - All - F.S. 222.18 (1941). j. Unemployment Comp Benefits - All - F.S. 440.22 (1936). k. Veteran’s Benefits - All - F.S. 222.201 (1987) and744.626 (1993). l. Crime Victim Compensation - All - F.S. 960.14 (1994) m. Prepaid Post 2nd Educe. Funds - All- 222.22 (1988) n. Alimony and Support - All - F.S. 222.201 (1987) o. Social Security Benefits - All - F.S. 222.201 (1987) p. Disability Benefits - All - F.S. 222.201 (1987).
4. Jurisdiction: State Court has concurrent jurisdiction to determine scope of automatic stay and whether obligations arising from a Marital Settlement Agreement or Final Judgment of Dissolution of Marriage are in the nature of alimony/support. Only the Bankruptcy Court can determine if marital obligations should be exempted from discharge.
5. Questions to ponder is your opposing party files a bankruptcy petition:a. What chapter was filed? b. Has a adversary complaint been filed in the bankruptcy case under statute 523(a)(5) or 523(a)(15) c. Have any Motions for Relief From Stay been filed? d. Has a Motion for Removal been filed under Statute 362(a) Automatic Stay. A. Scope: The filing of a bankruptcy petition operates as a stay of all proceedings against the debtor of the debtor’s property. B. 362(b) Exemptions to Automatic Stay. 1. Establishment of paternity. 2. Establishment or modification of an order for alimony maintenance or support. 3. The collection of alimony, maintenance or support from property that is not property of the estate. C. Application of exceptions. 1. Contempt proceeding filed in State Court to collect delinquent support would not be stayed. In Re Mann. 88 BR 427, (Bankr. S.D. Fla. 1988). D. Caviat: 1. You will not be able to seek or obtain an order that would require the debtor to use property of the estate to purge contempt. 2. A Motion to Modify Child support filed in State Court after the debtor has filed bankruptcy is not subject to the Automatic Stay. - Statute 362.(b)(z)(A)(ii). 3. The State Court can determine whether the automatic Stay applies. In Re Montana, 185 BR 650, (Bankr S.D. Fla. 1995). E. Practice Tip: When in doubt if you may proceed with an action in State Court file a Motion for Relief from Stay in Bankruptcy Court.