Hi Geraldene:
Unless the law has changed since 2007 when I briefed this issue in a case, marital or equitable distribution debts are normally dischargeable unless it can be shown that they constituted “alimony, maintenance, or support."
Below is cut n paste from my letter brief to the Court (where I represented the party who had filed bankruptcy after a divorce)...
In the event of an individual’s bankruptcy subsequent to a divorce and property settlement agreement, it is federal law that governs whether a matrimonial obligation is exempt from discharge pursuant to 11 U.S.C. § 523(a)(5). E.g., Larbig v. Larbig, 384 N.J. Super 17, 26 (App. Div. 2006); Davis v. Davis, 2005 WL 3299348 at *2 (N.J. Super., App. Div. 2005). Furthermore, it is the party who objects to the discharge of a particular debt has the burden of proving nondischargeability. In re Gianakas, 917 F.2d 759, 761 (3rd Cir. 1990) (citing Bankruptcy Rule 4005; Matter of Long, 794 F.2d 928, 930 (4th Cir. 1986); In re Klippinger, 27 B.R. 530, 531 (Bankr.M.D.Pa. 1982)).
Under the Bankruptcy Code, a general discharge obtained by a debtor under 11 U.S.C. § 727(a) pursuant to filing a Chapter 7 petition “discharges the debtor from all debts that arose before the date of the order for relief.” However, 11 U.S.C. § 523(a) sets forth the debts that are exempted from discharge, including in that list any debt “for a domestic support obligation.” 11 U.S.C. § 523(a)(5).
In order to avoid the debt being discharged, the creditor (here, Eileen Lazarus) must persuade the Court that the obligation in question actually constituted “alimony, maintenance, or support.” Davis, supra, at *1 (quoting In re Gianakas, supra, at 761-762). As the Legislative Statements for 11 U.S.C. § 523 clearly explains:
Section (a)(5) “excepts from discharge a debt owed to a spouse, former spouse, or child of the debtor, in connection with a separation agreement, divorce decree, or property settlement agreement, for alimony to, maintenance for, or support of such spouse of child, but not to the extent that the debt is assigned to another entity. If the debtor has assumed an obligation of the debtor’s spouse to a third party in connection with the separation agreement, property settlement agreement, or divorce proceeding, such debt is dischargeable to the extent that payment of the debt is not actually in the nature of alimony, maintenance, or support of the debtor’s spouse, former spouse, or child.” (Emphasis added).
This factual determination with respect to dischargeability of the marital obligation “depends on a finding as to the intent of the parties at the time of the settlement agreement.” In re Giankas, supra, at 762. Federal and state courts have concurrent jurisdiction over such a dispute. Davis, supra, at *1.
The Court of Appeals for the Third Circuit described the manner of ascertaining the intent of the parties, in this setting, in the following way:
“First, the Court must examine the language and substance of the agreement in the context of surrounding circumstances, using extrinsic evidence if necessary.... Because the language of the agreement alone may not provide a sufficiently conclusive answer as to the nature of an obligation, the second indicator to which we must look to assist in ascertaining the parties' intent is the parties' financial circum-stances at the time of the settlement.... Third, the Court should examine the function served by the obligation at the time of the divorce or settlement.”
In re Giankas, supra, at 762-763.
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Blake Rush Esq.
Easton PA
(610)258-4003
Original Message:
Sent: 10-28-2015 13:49
From: Geraldene Duswalt
Subject: (no subject)
I am writing a brief on the non-dischargability of equitable distribution debts that were allocated in a divorce. I am not finding any recent cases and was wondering if anyone knew of anything recent. The debtor filed a chapter 7. If so, it would be greatly appreciated.
Thanks,
Gerri Duswalt
GERALDENE SHERR DUSWALT
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