Author Topic: Chapter 7 after Divorce  (Read 2158 times)

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DebtorMan

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Chapter 7 after Divorce
« on: February 09, 2016 05:43:27 PM »
Hello...

I am inquiring about chapter 7 bankruptcy in Wisconsin following a divorce.  Specifically, what should my strategy be in handling a creditor who has a debt of mine that was incurred during the time I was legally married?  My ex-wife had a "hold harmless" clause in the final divorce stipulation, so because I filed Chapter 7 after the divorce was final, the creditor could sue her, and then in turn, she could take me back to court to try to get a decision from the judge that I have to pay the debt.  Is there any strategy such as declaring insolvency (which I am insolvent based on the IRS definition) that would keep the creditor from receiving a money judgment against me for the debt?  Looking for best approach in handling creditors who might sue my ex-wife to try to recover a debt that I would be trying to discharge in the chapter 7 bankruptcy.  Thanks for your comments and opinions in advance.

bdrew6

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Re: Chapter 7 after Divorce
« Reply #1 on: February 10, 2016 03:53:40 AM »
what type of debt is it?

If it was a loan or credit card, was she a co-signer or a authorized user?
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despritfreya

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Re: Chapter 7 after Divorce
« Reply #2 on: February 10, 2016 11:41:27 AM »
1.  It sounds like you have already filed Chapter 7 and either have been discharged or are about to be discharged.

2. It sounds like divorce decree made certain debts your responsibility as you are required to hold your ex “harmless”.

3. You are on the right track but understand, “insolvency” has nothing to do with anything.   Filing a Chapter 7 means you are “insolvent”.

4. The actual creditor cannot sue you.  The discharge will stop the actual creditor.  However, if your ex is called upon to pay the debt, your ex will have the right to demand payment from you since your obligation to hold her "harmless" was not discharged.

5. If your ex ever asks you to step up to the plate to pay the creditor and you refuse to, your ex can take you back to court to seek a contempt order for violating the divorce decree.  She may have other options but that depends upon state law.  Can your ex seek to garnish with a contempt order or other type of order? Probably, but, again, that depends upon state law.

Bottom line here is, until your ex reacts negatively to the bankruptcy, there appears to be nothing for you to do. 

I hope this clarifies the issue.

Des.

Bruno the JDB Killer

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Re: Chapter 7 after Divorce
« Reply #3 on: February 10, 2016 05:21:24 PM »
Found this, but you really need to get FlyingIFR's opinion.


Your bankruptcy discharge eliminates your obligation to pay your dischargeable separate debts and joint debts.  Your discharge does not affect your spouse’s responsibility toward any joint debts.  This means that your spouse is responsible for paying back his or her separate debts and is still on the hook for any joint debts you had together.
I am not an attorney. Any information I post is strictly my opinion and should be treated as such.

Flyingifr

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Re: Chapter 7 after Divorce
« Reply #4 on: February 10, 2016 05:28:35 PM »
Found this, but you really need to get FlyingIFR's opinion.


Your bankruptcy discharge eliminates your obligation to pay your dischargeable separate debts and joint debts.  Your discharge does not affect your spouse’s responsibility toward any joint debts.  This means that your spouse is responsible for paying back his or her separate debts and is still on the hook for any joint debts you had together.

That is true, but she has a Hold Harmless agreement from you, so creditor sues her under the debt contract and she sues you under the Hold Harmless agreement. Unless you listed her as a creditor in the BK, I don't see any wiggle room for you to get out from this debt. I am not an attorney, and it is an attorney's opinion you need.
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despritfreya

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Re: Chapter 7 after Divorce
« Reply #5 on: February 11, 2016 12:12:45 PM »
Unless you listed her as a creditor in the BK, I don't see any wiggle room for you to get out from this debt.

Again, the hold harmless provision is not discharged regardless of whether or not the ex is listed as a creditor.  Please review 11 USC 523(a)(15).  OP will have to deal with the ex if and when she comes calling.

Des.

The Litigator

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Re: Chapter 7 after Divorce
« Reply #6 on: February 11, 2016 08:51:02 PM »
Hello...

I am inquiring about chapter 7 bankruptcy in Wisconsin following a divorce.  Specifically, what should my strategy be in handling a creditor who has a debt of mine that was incurred during the time I was legally married?  My ex-wife had a "hold harmless" clause in the final divorce stipulation, so because I filed Chapter 7 after the divorce was final, the creditor could sue her, and then in turn, she could take me back to court to try to get a decision from the judge that I have to pay the debt.  Is there any strategy such as declaring insolvency (which I am insolvent based on the IRS definition) that would keep the creditor from receiving a money judgment against me for the debt?  Looking for best approach in handling creditors who might sue my ex-wife to try to recover a debt that I would be trying to discharge in the chapter 7 bankruptcy.  Thanks for your comments and opinions in advance.

Your game plan was all wrong here.

IHMO, you should have filed Chapter 7 before divorce, not after.

You might have created domestic support obligation which can't be discharged.

DebtorMan

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Re: Chapter 7 after Divorce
« Reply #7 on: February 12, 2016 08:55:45 PM »
Thank you for all of your input.  Yes, hindsight is 20/20...if you are going to consider bankruptcy in a divorce case, file BEFORE the final divorce hearing.  In my situation filing afterwards, I am going to likely have to set up payment plans with those creditors who go after my X for payment of a marital debt obligation.  Hopefully, the number of creditors who pursue her for various marital debt is minimal; otherwise, at some point, it may be less costly to change to a Chapter 13 and make a monthly payment over 5 years, mostly for the secured debt.  I will post back after chapter 7 discharge to let you know how aggressive the creditors were in chasing after her for the marital debt.  Thanks again for all of your input!

The Litigator

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Re: Chapter 7 after Divorce
« Reply #8 on: February 15, 2016 03:37:46 PM »
What good is a "fresh start" if all your debts are martial debts? Your divorce atty should have hashed out these details.

From what I have seen, a bankruptcy judge my discharge your obligation to the creditor and shift liability to your ex without looking at the decree. However a Family Court judge will almost certainly find you in contempt if your ex files a petition.

Be advised just because a credit card isn't "joint" doesn't mean it isn't marital debt. Anything accumulated during your marriage is marital property regardless of whose name is on it.

coltfan1972

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Re: Chapter 7 after Divorce
« Reply #9 on: February 15, 2016 04:16:25 PM »
Your divorce atty should have hashed out these details.

 :vbrofl: Good one!  That would have required an attorney working hard for their client's best interest.   I needed that morning laugh, thanks!
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JONESBORO, Ark. - A federal judge in Arkansas on May 15 ruled that dismissal of a consumer's lawsuit against a debt collector is not proper because although the consumer posted messages on a website "in an odious manner," valid First Amendment concerns exist (Brandon Scroggin v. Credit Bureau of Jonesboro Inc., No. 12-0128, E.D. Ark.; 2013 U.S. Dist. Lexis 69070).

Bruno the JDB Killer

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Re: Chapter 7 after Divorce
« Reply #10 on: February 15, 2016 04:21:24 PM »
I wonder if he had a BK attorney for this.
I am not an attorney. Any information I post is strictly my opinion and should be treated as such.

bdrew6

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Re: Chapter 7 after Divorce
« Reply #11 on: February 15, 2016 05:54:07 PM »
The consumer debt ( the CC ) will be discharged in a BK, but under the hold harmless agreement, a new contingent debt is formed on discharge to the spouse which is exempt per 523(a)(15).  So if the CC goes after your ex you will be liable. 
(Pro se) BK chap 7 {discharged}
(Pro se) 3 TCPA  {2 settled, 1 win (Federal)}
(Pro se) 1 FDCPA {1 settled}
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DebtorMan

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Re: Chapter 7 after Divorce
« Reply #12 on: February 17, 2016 10:15:28 PM »
Believe it or not, I did have a bankruptcy attorney for this.  He was aware of the risk, but said only a few accounts in the mix of my debts exiting the divorce would be high risk, so chapter 7 was still the recommended approach.  One of those 2 high risk accounts already contacted my x to pay the debt that was for a medical bill I incurred in late 2015.  I set up a payment plan with them today...they had never heard of a situation like this before which surprised me.  So basically, we (attorney and I) are waiting to see how many accounts contact her (he believes only 2 will).  At some point, it may be advantageous to convert this to a chapter 13 if the negotiated payments per month on several accounts are too significant as compared to the chapter 13 payment.

How would this change if the chapter 7 was converted to a 13?  Would I have additional protection against the x seeking to have her liability transferred back to me via a court judgment?  My attorney is considering that he will exercise "plan B" in changing the filing to a chapter 13 if the negotiated monthly payments on any debt gets too high per month, in that the amount of those payments would surpass the chapter 13 payment to the trustee monthly.  Would the Chapter 13 release her and I of any liability for the debts incurred while we were married?

Thanks for all the input...learning a lot from your comments so far!

coltfan1972

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Re: Chapter 7 after Divorce
« Reply #13 on: February 17, 2016 11:20:45 PM »
He was aware of the risk, but said only a few accounts in the mix of my debts exiting the divorce would be high risk, so chapter 7 was still the recommended approach.

Do you know how much easier it is for an attorney to do a straight chapter 7 than a chapter 13?

You have some complex questions that your BK attorney should be able to thoroughly answer! If not, get a new attorney.   I'm sure they are going to hit you up for me fees if they do the conversion, so get your money's worth.
LexisNexis® Legal Newsroom- 05-17-2013 | 10:11 AM --

JONESBORO, Ark. - A federal judge in Arkansas on May 15 ruled that dismissal of a consumer's lawsuit against a debt collector is not proper because although the consumer posted messages on a website "in an odious manner," valid First Amendment concerns exist (Brandon Scroggin v. Credit Bureau of Jonesboro Inc., No. 12-0128, E.D. Ark.; 2013 U.S. Dist. Lexis 69070).

despritfreya

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Re: Chapter 7 after Divorce
« Reply #14 on: February 18, 2016 12:56:28 AM »
Assuming you have not received your Chapter 7 Discharge, you need to think long and hard about converting to a three to five year Chapter 13.

1. 11 USC 523(a)(15) does not apply in a Chapter 13 but 523(a)(5) does.

2. Regardless of what your divorce decree states as it relates to “support”, a bk judge has the absolute right, if asked, to make a determination as to whether or not the “hold harmless” clause is “in the nature of support”.  If it is found to be “in the nature of support”, you are stuck with the obligation, no different from the Chapter 7 - except now, you must pay it through the Chapter 13 Plan as a “priority” obligation. 

So, is your ex “vindictive” enough to file an action against you in the Chapter 13 seeking such a determination?  If “yes” you will have to defend it.  You may very well win but spend big bucks in legal fees to get there.

4. Along similar lines as #3 above, if the “hold harmless” clause is not “in the nature of support” and will be discharged in the Chapter 13, what is stopping the ex from re-opening the divorce proceeding and seeking the imposition of a support order?  While such may be a rare duck, it can happen. See Birt v. Birt, 208 Ariz. 546, 96 P.3d 544 (Ariz. App. 2004) as it applies to the State Court's ability to revisit the finality of a divorce decree, at least in Arizona.

5.  How much is owed on each of the obligations relating to the “hold harmless” clause?  In the context of the Chapter 7, there is nothing stopping you from negotiating a settlement for a lesser amount with each creditor as they come calling.  The settlement would require the creditor to release your ex as well.  This approach could be cheaper than converting to a Chapter 13.

Please make sure you discuss all options with your attny.

Des.