Bankruptcy Update: Divorce Related Debts Dischargeable?

The two tests are as follows and one must be applicable to you. One: the debtor does not have the ability to pay the debt or Two: a discharge would benefit the debtor more than be a detriment to the ex-spouse.

This Statute applies to all Chapter 7 cases and does not apply to Chapter 13 cases. Of course like all debts, in order to call the discharge into question, a complaint to determine dischargeability must be filed within 60 days of the first set date for the meeting of creditors. Since the Statute is vague, it leaves the actual determination up to the courts on a case by case basis. This causes different rulings and applications in different federal jurisdictions; thus a debtor with these types of debts must consult his or her local bankruptcy expert to be properly advised.

The Statute also raises many issues to consider. How does the court consider whether or not the debtor has the ability to pay? What assets or income is considered in this analysis? Can a new spouse's income be considered? And, can assets which are exempt under the Bankruptcy Law be considered? These issues are all being addressed on an individual case basis and in order to be properly advised you must consult an attorney in your local federal jurisdiction who has knowledge of the local decisions. The Second test which compares the benefit of the debtor to the detriment of the ex-spouse causes similar problems, issues and questions. Is it simply fining out who is poorer? What assets, income and other financial obligations of the debtor and ex-spouse are considered? And what if the benefit and detriment are equal? Again, the best course is to consult an attorney with significant bankruptcy experience as quickly as possible.