Legal Blog

What Do You Do If Your Ex-spouse Owes You a Large Settlement Payment, But Has Filed For Bankruptcy?

I’m divorced and my spouse owes me a large settlement payment, but he/she has filed for bankruptcy.  Am I out of luck? Not necessarily. In 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) and gave a boost to the rights of spouses who are owed money by a party who filed for bankruptcy.Pre-BAPCPA, property settlements were generally presumed nondischargeable under 11 USC § 523(a)(15) subject to two very broad exceptions: the “inability to pay” exception, and the “balancing test.”  The majority of cases decided under § 523(a)(15) ruled that a creditor (the non-debtor spouse) had the initial burden to show the debt to be nondischargeable; but a debtor, as an affirmative defense, had the burden to show that one or both of the exceptions applied, i.e. that he/she didn’t have the ability to pay the debt, or that upon balancing the equities of the case, discharging the debt would be fair.

The BAPCPA has eliminated these exceptions. The simplified statutory provision now requires limited specified elements of proof by the non-debtor spouse: (1) that the debt is owed “to a spouse, former spouse, or child of the debtor;” (2) that the debt is not a domestic support obligation as described in § 523(a)(5)(more on that later); and (3) that the debt “is incurred by the debtor in the course of a divorce or . . . divorce decree or other order of a court of record . . .” § 523(a)(15) (post-BAPCPA).If these elements are met, the debt is non-dischargeable and the non-debtor spouse’s debt will survive the bankruptcy case. If you have any questions about divorce settlements or would like further information relating to the contents of this article please contact Alex Allman at: Divorce in Maryland aallman@offitkurman.com | 410.209.6438
Alex Allman  focuses his practice in the areas of family law and civil litigation. Mr. Allman has been involved in handling all aspects of domestic or family law cases, including divorce, property distribution, child custody, child support and alimony, as well as a broad range of complex commercial and civil litigation.   You can also connect with Offit Kurman via Facebook, Twitter, Google+, YouTube, and LinkedIn.