Debts owed to ex-spouses through a provision in a hold-harmless provision in a divorce decree are automatically non-dischargeable in a bankruptcy filing, according to a court ruling.
A recent Court of Appeals decision (In re the Marriage of: Jason Paul East vs. Yvette Francis East, File No. 74-FX-05-000284) provides that the ex-spouse of an individual filing a bankruptcy does not need to make a formal objections to the discharge of obligations assigned to the filing former spouse through a marriage separation or dissolution proceeding. In others word, a hold-harmless obligation in the favor of a former spouse automatically can not be discharge through the bankruptcy.
The court stated that language used in the exception to discharge set forth in the Bankruptcy code, 11 U.S.C. Section 523(a)(15)(2006) is clear and should be interpreted as written.
The court also found the an aggrieved former spouse does not need to participate in the bankruptcy since the nondischargeablity of the debts outlined in a hold-harmless clause is automatic. The former spouse does not need to file an objection in the bankruptcy.
This case emphasizes the bankruptcy court’s limited ability power to undo the decisions made in a family court. A Chapter 7 Bankruptcy Proceeding can not provide relief for a debtor assigned debt through his divorce.
This decision should cause family law practitioners to pay special attention to the issue of debt assignment in a separation or dissolution proceeding.