Californians who are preparing to divorce should take care with how they term different payments in their property settlement agreements. As a recent that was decided in Georgia demonstrates, family court orders that purport to state certain types of property division payments cannot be discharged in bankruptcy may be invalid.
In the case, a man was ordered to pay his ex-wife $1,300 per month in child support and an additional $53,000 that was payable to her as a part of the property division order. The judge also ordered that the $53,000 payment could not be discharged in bankruptcy. Two weeks after the divorce was final, the man filed for bankruptcy and his ex-wife filed an objection to the discharge of the $53,000 payment he owed to her.
The bankruptcy court ruled that a state family court is not able to declare that property division payments are not dischargeable in bankruptcy as a matter of public policy. The bankruptcy court then allowed that the $53,000 debt was dischargeable upon the man’s successful completion of his Chapter 13 repayment plan. The child support amount was not dischargeable, however.
When people get divorced and paying parties subsequently file for bankruptcy, they are unable to discharge spousal and child support debts as a matter of public policy. Other amounts that they agree to pay or are ordered to pay that are not spousal support or child support may be discharged in bankruptcy. When people are drafting their property settlement agreements, it is important that they understand the correct legal terminology to use in order to protect themselves. Family law attorneys may assist with drafting proposed agreements and reviewing those that are presented to their clients. The attorneys may make certain that the language used in the agreements will withstand potential problems if the party who has been ordered to pay subsequently files for bankruptcy.