Posted on Jul 06, 2010

It is not unusual for people getting divorced to be in financial straits; many times that is the basis for the fights that led to the "irreconcilable differences" that led to the divorce in the first place!  In addition, filing bankruptcy as part of a divorce strategy can also make it much easier to resolve issues of marital debt in family court.   However, if not paying your own attorney's fees is part of the plan, tread carefully!

An article on the Bankruptcy Law Network brings to light an interesting case from a Georgia Bankruptcy Court where the wife planned to file bankruptcy from the very beginning, telling her attorney that she would pay him from 401(k) pension funds obtained in the divorce.  After she filed, seeking discharge of over $35,000 in fees, the attorney filed an objection to discharge, claiming that the debt was incurred by the debtor through "false pretenses, false representation or actual fraud" under section 523(a)(2)(A) of the bankruptcy code.  After a trial, the court agreed, and the fees were still due and owing.

This brings up the general admonition to be careful about what debt you incur once you realize that you are insolvent.  Creditors and bankruptcy trustees scrutinize the activities of debtors in the months leading up to the filing of the petition.  Was there a lot of credit card use?  What was purchased?  What is worse, bankruptcy law interprets fraud from an objective, rather than subjective, standard.  In other words, you may not have any intent to defraud creditors.  You might have every intention to pay once you get a job, get that bonus, or get that raise.

However, it is your objective ability to pay the debt at the time it is incurred, not your subjective intent, that rules here.  If this sounds like you, be sure to discuss it with your attorney as part of the bankruptcy preparation process, because if you incurred a debt that you simply could not afford, it might be denied a discharge under the section mentioned above, even absent the bad intent of the woman in that case.

Steven J. Richardson
Connect with me
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.


Richardson Law Offices