California residents who are facing both a divorce and bankruptcy may be interested to learn that a federal bankruptcy judge recently determined that bankruptcy could potentially wipe out divorce settlement obligations. The case was taken to federal court after a Georgia judge determined that the state court did not have jurisdiction to determine the effect of the bankruptcy on a divorce settlement.
About two weeks after a Georgia couple finalized their separation, the ex-husband filed for Chapter 13 bankruptcy. Under Chapter 13 bankruptcy, an individual can seek debt relief while maintaining their property. However, they would have to come up with a plan that requires any future income to be used to pay a portion or all of the debt that they owed over a period of up to five years. In their divorce decree, the ex-husband had agreed to pay a lump sum and a certain amount in child support to his ex-wife.
The ex-wife sued for a declaration that the lump sum owed to her would not be discharged under the ex-husband's bankruptcy case. However, the federal court ultimately determined that the lump sum owed could potentially be discharged when the ex-husband was finished drafting up the bankruptcy payment plan.
Dividing marital property up between two former spouses can be difficult, especially if the former couple has been married for many years or has obtained numerous marital assets. If the two cannot agree on how to divide up the assets, a family law attorney may help in the negotiation process. If the other party attempts to avoid paying what was agreed upon in the divorce settlement either by filing for bankruptcy or by simply refusing to transfer the assets, the attorney may determine a legal response.