Property distribution special contexts Flashcards
what is bankruptcy in divorce?
Event that affects a divorced spouse’s ability to pay a property award or spousal support
How does Bankruptcy Work
*Divorce petition is filed in state court
*Bankruptcy petition is filed in federal court
*Federal law preempts state law
*When a bankruptcy petition is filed, the federal bankruptcy court issues an “automatic stay”
*Automatic stay means that any property issues (such as collections) must stop
- Normally, petitioner’s attorney will file notice of the stay in the family court (to tell state court that a federal proceeding is going on and that state proceedings must stop
what are the exceptions to a bankruptcy automatic stay?
Exceptions to automatic stay
*Child support, spousal support, custody, visitation, collection of attorneys’ fees
**These issues can still be determined by state court
**But property determinations must wait until bankruptcy court grants relief from the stay (or the bankruptcy action ends)
Automatic stay stops property division but not determination of custody, child support, or spousal support
what is discharged in bankruptcy
Property division obligations are dischargeable in bankruptcy But
*Spousal support (and child support) obligations are NOT dischargeable
a debt “to a spouse or former spouse or child” which is not dischargeable in Chapter 7 bankruptcy following BAPCPA
Rule on Pensions
*Majority rule: Both vested and unvested pension benefits are marital property subject to equitable distribution (FL follows majority)
*Minority rule: Only vested pension benefits are marital property subject to equitable distribution
Rule for investment in spouse’s future
Majority rule: Refuses to treat degrees, licenses, and enhanced earning capacity, as a marital asset that is subject to distribution*But courts take it into account in other ways to achieve a fair result
