Thursday, June 14, 2007

Case Law Development: Dischargeability of Mortgage Payments Required by Divorce Decree

In a chapter from a  "protracted and ugly" divorce case, the bankruptcy court held that a Husband's obligation to "assume and pay and hold [Ex-Wife] harmless from . . . the second mortgage on the parties' home" was in the nature of support and thus was not dischargeable in bankruptcy.  The case would be useful for students to read not only for the bankruptcy analysis, but as a demonstration that securing a divorce decree is only the first step in enforcing support obligatiosn.  As the court here noted, the husband's attempts to discharge the mortgage obligation "has almost exhausted the resources of both the federal and state courts of Utah." 

As to the characterization of the obligation itself, the court noted that whether an order is in the nature of support is a matter of federal bankruptcy law, so that  "a debt could be in the 'nature of support' under [bankruptcy law] even though it would not legally qualify as alimony or support under state law."  Here the court correctly determined that to the extent the mortgage obligation was premised on the right of the Debtor's children to live in the home until age 18.

The court split on the issue of whether attorneys fees were properly awarded.

Busch v. Hancock (In re Busch), US Bankruptcy Appellate Panel of the 10th Circuit (June 4, 2007)

Read opinion (last visited June 14, 2007 bgf)

http://lawprofessors.typepad.com/family_law/2007/06/case_law_develo_1.html

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