Bankruptcy and Divorce

Does your spouse’s threat of filing bankruptcy hold water during divorce settlement negotiations?

Spouses sometimes attempt to scare and intimidate each other with threats regarding their filing for bankruptcy. You should receive notice of any bankruptcy action and assert your interest accordingly. [See: 11 USC 523(a)(15)]

The following is a rough cut, paste and simplification from the Bankruptcy Code. You should only try to understand your spouse's threat of bankruptcy as it specifically applies to your circumstances with the advice of an attorney who is dealing with you and your circumstances directly. Suffice to say, the edited and highlighted portion of the code presented below details the protections imbedded in the code against abuse of bankruptcy law by spouses intent on using bankruptcy to avoid spousal or child support obligations.

TITLE 11. BANKRUPTCY:

§ 523. Exceptions to discharge

A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title [11 USCS § 727, 1141, 1228(a), 1228(b), or 1328(b)] does not discharge an individual debtor from any debt such as those related to domestic support obligations; to a spouse, former spouse, or child of the debtor and not of the kind that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit unless—

    (A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or

    (B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor… 

This information is not reported here as it appears in Title 11, and should be considered with the greatest care.

The above answer is not offered as legal advice and presumes you do not already have an attorney.