Divorcing Couples Beware - If One Party As Part Of A Divorce Settlement Agrees To Pay A Joint Debt Then Later Files For Bankruptcy They May Get Away Without Having To Indemnify The Ex-Spouse
Released on: January 9, 2008, 4:02 am
Press Release Author: Andy Anand
Industry: Law
Press Release Summary: Confusing ruling in the case of Harris v. Croce, No. E040674 (Super.Ct.No. FAM 115967)
Press Release Body: January, 9. 2008- The California Fourth Appellate District, Division Two, made what many may find a confusing ruling in the case of Harris v. Croce, No. E040674 (Super.Ct.No. FAM 115967), December 11, 2007. In the subject divorce case in 1994 the parties, as part of the marital settlement agreement, both waived spousal support and the husband agreed to pay a certain unsecured debt in the amount of $140,000. Apparently the man never paid on the debt and by the time it was written off by him in a Chapter 7 bankruptcy the amount owed had increased to $230,000. The ex-wife, fearing she was going to get stuck paying the debt, went back into the family law court seeking relief. At that time the debt had increased to $239,000. The trial court, apparently using an anticipatory breach theory, allowed the ex-wife to obtain a writ of execution against her ex-husband on the debt. She was ordered to then remit any monies obtained via the writ to the parties owed the monies. The court of appeals disagreed. As the Appellate Court states, it is settled law that a party cannot write off spousal support in bankruptcy. Yet in this case there was no reason to believe the debt was taken on by the husband in lieu of spousal support. The appellate court, however, states the ex-husband may be able to get around having to indemnify the ex-wife anyhow if the trial court finds in his favor applying Title 11 U.S. Code Section 523(a)(15), subparagraph (A) or (B). The Appellate court citing In re Montgomery (2004) 310 B.R. 169, states \"...Section 523(a)(15)...precludes a discharge of the debtor in the course of a divorce, separation, or separation agreement unless (a) the debtor does not have the ability to pay from the income or property of the debtor such as a debt or (b) the discharge of the debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse or child of the debtor.\" The case was remanded to the trial court for hearing on the application of the Code sections to the facts. (Presiding Judge P. J. Rameriz desenting by separate written opinion).
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