ASK ANGIE^TM
By Angela Hallier, Esq.
Answers to your divorce and family law questions

Q My spouse says if I do not take the divorce settlement being offered he will file bankruptcy after we divorce and I will get nothing. Could that happen?

A You cannot stop a former spouse from filing bankruptcy if he or she qualifies to do so under federal law. However, those same laws help protect you if such a bankruptcy is filed. Child support, spousal maintenance, or any other payments your spouse is ordered to make which can be considered a form of support for you or your children cannot be eliminated (discharged) by bankruptcy. In some cases, even attorneys' fees a spouse is ordered to pay are considered "support" and therefore not dischargeable. Thus, these types of payments will not be affected if your spouse files for bankruptcy.

Payments you are to receive as part of your property settlement or debt payments to be made by your former spouse, however, are treated differently. Prior to 1994, such payments could be eliminated if the person who owed them declared bankruptcy. In 1994, bankruptcy laws were changed to address that loophole. Now, payments or debts that were assigned to the person filing bankruptcy in the course of a divorce or legal separation cannot be discharged unless that person can show significant hardship (more specifically defined in the law itself) will result unless the debt is eliminated. The level of hardship required can be difficult to prove and, thus, many times these types of debts or payments are not discharged. Be warned, however, that the burden of showing such debt or payment obligations should remain in full force rests on you, as the spouse who is to receive the payments or benefit from the divorce order. You must take affirmative action in your former spouse's bankruptcy action to protect your rights.

A case recently decided by the Arizona Court of Appeals may further diminish a former spouse's ability to benefit after a divorce by filing bankruptcy. In that case, the trial judge ordered each party to pay an equitable portion of the community debt and Wife was to pay Husband additional monies for his share of the property she was keeping. After the divorce was final, Husband filed bankruptcy and successfully discharged the debt assigned to him by the court. This effectively left Wife in the position of having to pay the debt assigned both to her and her ex-Husband because a court's decision as to whom should pay what portion of community debt in a divorce is binding only between the parties, not as to creditors. As the creditors were now barred from pursuing payment from Husband, Wife could be pursued for all of the debt. Wife requested the court modify the divorce decree to account for the unfairness which had now resulted. The Court of Appeals held that based on the specific facts of this case, Wife was entitled to a new trial and directed the trial court to determine whether the original orders should now be modified.

Based on current law, your spouse's bark is probably bigger than his bite. In all cases, however, if a spouse threatens to file or does file bankruptcy, either during the divorce or after the divorce decree is entered, seek immediate guidance from a bankruptcy expert, as well as your divorce attorney.

It is always advisable to seek the counsel of a qualified attorney who can advise you specifically about your case. The information in this column is provided for general information only in the state of Arizona, is not specific to any one case and does not create an attorney-client relationship between the author and the reader. ©2003 - 2008 Hallier Law Firm PLC

ASK ANGIE^TM is published monthly in Arizona Trends Magazine.