What Happens to Divorce Debts in Bankruptcy?

Debts in the nature of support of child or former spouse are not discharged in either chapter 7 or 13 bankruptcy.

What about property settlement debts?  If the divorce decree contains a hold harmless obligation that makes one spouse indemnify the other spouse, then the hold harmess oglibation is a separate debt to the spouse and is not dischargeable in chapter 7 bankruptcy 523(a)(5) or 523(a)(15).

The hold harmless obligations can be discharged in chapter 13 bankruptcy as long as the debt to the former spouse not a Domestic Support Obligation (DSO).  This is possible because property settlement debts under 523(a)(15) are not excepted from discharge in chapter 13 cases.  See Schuett v. Finkey, 2008 Bankr. Lexis 1555 (Bankr. D. Neb. May 21, 2008).

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3 Responses to What Happens to Divorce Debts in Bankruptcy?
  1. [...] Kansas Bankruptcy Information:  Looks at what happens to divorce debts after bankruptcy. [...]

  2. JST Books
    May 10, 2011 | 9:18 am

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    June 27, 2011 | 12:01 pm

    [...] divorce between the owners, Frank and Jamie McCourt, which makes another point:  bankruptcy and divorce go hand in [...]

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