Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
By Daniel Gill
A Georgia Superior Court judge couldn’t order that a divorce settlement can’t be wiped out in bankruptcy, a federal bankruptcy judge ruled March 8 ( Norton v. Norton (In re Norton) , 2017 BL 73251, Bankr. N.D. Ga., CASE NUMBER 16-10323-WHD, 3/8/17 ).
Even though the divorce decree provided that "[t]he property division payments to the Plaintiff shall not be dischargeable in bankruptcy,” Judge W. Homer Drake of the Northern District of Georgia makes clear that the Georgia court lacked jurisdiction to decide the effect of bankruptcy on the divorce.
While it is well settled that agreements between parties can’t provide that an obligation isn’t subject to bankruptcy relief, this opinion makes clear that even a state court judgment or decree can’t do that.
Less than two weeks after Karen and Harry Norton’s divorce became final, he filed for Chapter 13 bankruptcy, which allows individuals receiving regular income to obtain debt relief while retaining their property. To do so, the debtor must propose a plan that uses future income to repay all or a portion of his debts over a three- to five-year period.
After the payments are made, the remaining debt will be discharged, or erased. Certain kinds of debts aren’t discharged by bankruptcy, however. These exceptions include support obligations arising from divorce but don’t include property settlements distinct from support.
The divorce decree included provisions that Harry would pay Karen $1,300 a month for child support and $53,000 “as part of the property division,” the court said. But the decree also said that “the property division payments to the plaintiff shall not be dischargeable in bankruptcy,” it said.
Karen sued in the bankruptcy case for a declaration that the $53,000 obligation wouldn’t be discharged by Harry’s bankruptcy.
The bankruptcy court rejected the Georgia court’s decree that the obligation wouldn’t be dischargeable because it violated public policy. In addition, it found that the state court lacked jurisdiction to make that call.
The bankruptcy court performed an analysis of the nature of the debt—ignoring whether the parties or the state court called it support or property division—to determine that it belonged to the latter category and could be discharged in bankruptcy if and when Harry completed his plan payments.
Karen Norton was represented by David S. Ballard, Fayetteville, Ga. Griffin E. Howell III, Griffin, Ga., represented Harry Norton.
To contact the reporter on this story: Daniel Gill in Washington at email@example.com
To contact the editor responsible for this story: Jay Horowitz at JHorowitz@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)