ARE DEBTS ARISING OUT OF DIVORCE DISCHARGEABLE IN BANKRUPTCY?

Section 523 of the bankruptcy code list the categories of debt that are excepted from discharge.  Generally, this means if a bankruptcy filer has a type of debt that is listed in Section 523, then they will be responsible for the debt in spite of the fact that they filed for bankruptcy.  

There are various types of debt and/or financial obligations that may be created by virtue of a divorce decree.  Among these are domestic support obligations, including alimony and child support.  Section 523(a)(5) excepts domestic support obligations from discharge.  Therefore, debts owed for child support or alimony cannot be discharged in bankruptcy.  Although this has been the law for many years, prior to 2005, other types of debt created in a divorce decree or settlement agreement might have been dischargeable.  These other types of debt can include, for instance, obligations to pay off a former spouse’s credit card or home equity loan. 

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA).  BAPCPA made significant changes and additions to the existing bankruptcy code.  Among these additions was Section 523(a)(15), which exempts from discharge any debt “to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) 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.”  In 2010, Judge Robert E. Brizendine issued a ruling in which he interpreted this code section.  Judge Brizendine held that, when read jointly, sections 523(a)(5)&(15) render obligations created in a divorce decree nondischargeable. In Re: John Robert Cracknell, Debtor. Cheryl Diane Cracknell, Plaintiff v. John Robert Cracknell, Defendant., Northern District of Georgia, Case Number G09-21812-REB.      Therefore, at this point, in the Northern District of Georgia, any debts created in a divorce decree are nondischargeable.  This not only impacts those who have gone through a divorce, it also means that someone who is currently going through a divorce (or who may be considering filing for divorce) would be wise to consider the potential impact their divorce settlement may have on their ability to discharge those debts at a later date. 

If you have additional questions about bankruptcy, please call Brim Law, LLC at (678) 353-3350 for a free consultation.