Can My Ex Discharge the Debt Incurred in our Divorce?

As an initial point, this is a relatively complicated issue and if you are dealing with a former spouse who is planning on filing bankruptcy, you will want to get in touch with a family law attorney as quickly as possible.

A debt incurred in a Decree of Divorce can either be classified as a support or a non-support obligation. Traditionally, the distinction was highly relevant to a former spouse. Now, the distinction is almost entirely irrelevant. To simplify the distinction alimony is a support obligation and property settlement payments would be non-support. Additionally, the payment of a debt that obligates the other spouse will not generally be dischargeable.

Among other debts, a bankruptcy discharge “does not discharge an individual debtor from any debt . . . for a domestic support obligation;” 11 U.S.C. § 523(a)(5). Additionally, a debtor is not discharged from any debt to a former spouse “and not of the kind described in [section § 523(a)(5)] that is incurred by the debtor in the course of a divorce . . . or in connection with a . . . divorce decree.” 11 U.S.C. § 523(a)(15). Thus, if the debt is characterized as a domestic support obligation it is nondischargeable pursuant to 11 U.S.C. § 523(a)(5). If the debt is a non-support obligation it is nondischargeable pursuant to 11 U.S.C. § 523(a)(15).

Debts that are “in the nature of support for the [nondebtor spouse] and the minor children” are not discharged by bankruptcy. Beckmann v. Beckmann, 685 P.2d 1045, 1047 (Utah 1984). “[E]xtrinsic evidence is required to prove the underlying nature of the debt” to determine whether it is a support or non-support debt. Id at 1050. The court makes this determination by applying the following test: “if without the debt assumption, the spouse would be inadequately supported, the debt assumption was meant to be support.” Id. In Beckman, the debtor spouse “had been ordered to pay and hold the [nondebtor spouse] harmless from [debts] in a ‘property settlement agreement’ entered into by the parties, the terms of which were incorporated into the decree of divorce.” Id at 1048-49. The Court stated that “the fact that an instrument is labeled ‘property settlement agreement’ is not sufficient in and of itself to remove it from scrutiny beyond the four corners of the instrument.” Id at 1050. The Court went on to analyze additional evidence to determine whether the debt was in the nature of support despite the express property settlement language. Id. The trial court heard testimony that “[the nondebtor spouse] was on welfare; that as a result of [the debtor spouse’s] failure to hold her harmless against debts incurred during the marriage, judgment liens, tax liens, and employment tax liens in excess of $22,000 had been placed upon her house; and that she earned an income of $800 per month.” Id. Thus, the Utah Supreme Court held that the debts were for the maintenance and support of the former spouse and children and not discharged because the non-debtor spouse would be inadequately supported. Id at 1051.

As an additional point, the debtor spouse “bears the burden of proving by a preponderance of the evidence that the [debt] is not dischargeable under § 523(a)(5)”. In re Hammond (citing Miller v. Gentry (In re Miller), 55 F.3d 1487, 1489 (10th Cir. 1995), cert. denied, 516 U.S. 916 (1995). “Exceptions to discharge are narrowly construed in order to effect the purpose of the Bankruptcy Code to provide the debtor a fresh start; but, the policy underlying § 523(a)(5)favors enforcement of support obligations over the debtor’s fresh start. Id. “Support” under § 523(a)(5) is to be read broadly and in a realistic manner.” In re Hammond (citing Jones v. Jones (In re Jones), 9 F.3d 878, 881–82 (10th Cir.1993).

A divorce debt that does not qualify as a § 523(a)(5) debt automatically falls into the § 523(a)(15) category. In re Hammond, 236 B.R. 751 (Bankr.D.Utah 1998); see also Condie v. Condie, 2006 UT App 243, 139 P.3d 271. The Hammond court noted the legislature’s intent with this section of the code was to prevent discharges of divorce debts simply because they are determined to be non-support debts. Id. At the time of enactment, there were two sub-sections within § 523(a)(15) that allowed the debtor an opportunity to prove that the debts should be discharged despite being a non-support divorce debt. Under the current code, the exception has been removed. Therefore, any debt incurred in connection with a divorce or in a decree of divorce is not discharged. The law makes it pretty clear that there are no exceptions. For some reason, you may still run across attorneys and even judges who do not understand the bankruptcy code well enough to know that your spouse divorce obligations are not discharged.

good family law attorney can help you understand the consequences of your former spouse filing bankruptcy.

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