Does Filing Bankruptcy Excuse You From Court Ordered Divorce Fees?

By Rob Jennings J.D.

The financial pressures attendant to a divorce case can place enormous strain on a person's budget. Increasing expenses without increasing income can drive even the most financially responsible party to the brink of bankruptcy, but being ordered to pay the other side's court costs and legal fees can push him over. You can sometimes discharge court-ordered fees from divorce cases, but the specifics vary from case to case. Consult an attorney before making any decisions.

The financial pressures attendant to a divorce case can place enormous strain on a person's budget. Increasing expenses without increasing income can drive even the most financially responsible party to the brink of bankruptcy, but being ordered to pay the other side's court costs and legal fees can push him over. You can sometimes discharge court-ordered fees from divorce cases, but the specifics vary from case to case. Consult an attorney before making any decisions.

Nature of Payments

Section 523(a)(5) of the Bankruptcy Code makes domestic support obligations nondischargeable in all bankruptcy chapters. For a person's debt to be nondischargeable, the underlying debt must be in the nature of alimony, maintenance or support; owed to a former spouse or child; and incurred in connection with a separation agreement, divorce, property settlement agreement or other court order. Therefore, court-ordered payments that can be construed as support to a former spouse or child are not dischargeable, but those ordered in lieu of a property award may be. The nature of the required payment is not always obvious from the divorce decree itself. The determination of whether a debt is support or property is made under federal law. State law may, however, provide guidance.

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Domestic Support vs. Property

Domestic support obligations are nondischargeable in bankruptcy. Attorney fees that are part of a support obligation cannot be eliminated in bankruptcy, either. Payments are considered part of a property settlement agreement when they are used to offset assets awarded in the distribution of the estate. Payments made in the nature of a property settlement are dischargeable in Chapter 13 bankruptcy, but not Chapter 7. As such, Chapter 7 bankruptcy will not eliminate attorney fees that are connected to the property settlement. Only Chapter 13 bankruptcy can eliminate debts that arose from a property settlement agreement or court-ordered distribution.

Identity of the Creditor

The Bankruptcy Code states that the debt must be owed to a former spouse or child to qualify as a support obligation; attorney fees owed to the other spouse’s lawyer and not the spouse usually won't qualify. However, if one spouse was ordered to pay the other spouse's attorney fees in a support proceeding, the obligation may be considered in the nature of support. The bankruptcy court will look at the circumstances of a particular case when making a determination.

Adversary Proceeding

When one spouse files for bankruptcy, creditors, such as the other spouse, can initiate an adversary proceeding. The ex-spouse can object to the discharge of any divorce-related fees, with her complaint seeking a judgment finding the debt nondischargeable. However, "exceptions to discharge are to be construed strictly against a creditor and liberally in favor of a debtor."

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How Bankruptcy Affects Divorce Settlements

References

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