Bankruptcy + Divorce

[crayiii]

I have my 341 meeting today for my chapter 7 bankruptcy.  The settlement papers that my wife's attorney and I stipulated to are sitting on my counter unsigned by me for the following reasons:

1) The debt is all listed as being my responsibility.
2) There is a hold-harmless provision regarding the debt.

My bankruptcy attorney told me not to sign it because the hold-harmless provision could very well make my (marital) debt non-dischargeable.

Here are some facts:

My bankruptcy is in the State of Oregon, a non community property state
The divorce is in Washington State, a community property state
None of the debt is joint debt (wife's name is on none of it)
Some of the credit card debt occurred while we both lived in Washington
We have been separated for almost 2 years
Divorce was filed about 10-months ago
There has never been a request for support

Text of the hold harmless provision: "Each party shall hold the other party harmless from any collection action relating to separate or community liabilities set forth above, including reasonable attorney's fess and costs incurred in defending against any attempts to collect an obligation of the other party"

Here are my questions:

1) After my debt has been discharged, can the state court reassign the debt to me in the decree?

2)  Would the state court see the debt as a liability for my wife even though none of the accounts were joint?

3) If I sign the settlement that lists all of these debts as my responsibility and includes the hold harmless provision, will that supersede the bankruptcy?

4) After the bankruptcy don't the discharged debts cease to be my "obligation" under the hold harmless provision?

5) If you were my wife's attorney, what would you be doing to protect your client from my bankruptcy?

[socrateaser]

All answers assume that you do not sign the settlement prior to your bk being discharged.

>Here are my questions:
>
>1) After my debt has been discharged, can the state court
>reassign the debt to me in the decree?

Your bk cannot be discharged until you and your wife's interest in the various debts are determined. Generally, the bk court will defer to the state court for determinations of property in a dissolution, however, you can ask the federal court to make the determination, and more than likely, your wife will not challenge this, because her attorney is not a bk attorney, and she will have to hire a second attorney to represent her interests in federal court (and, that will fry the boyfriend's beans).

>
>2)  Would the state court see the debt as a liability for my
>wife even though none of the accounts were joint?

Who can say. You were married, but separated. There's lots of facts, such as when the debt was incurred, were you living together, etc. Way too speculative for a conclusion from me.

>
>3) If I sign the settlement that lists all of these debts as
>my responsibility and includes the hold harmless provision,
>will that supersede the bankruptcy?

It will determine the rights of the parties, if you have the stay lifted and the state court signs. You will have to show the bk judge your settlement. Personally, unless you like the deal, I wouldn't sign, because you will probably get a better deal from the bk judge.

>4) After the bankruptcy don't the discharged debts cease to be
>my "obligation" under the hold harmless provision?

If the federal court discharges the debts, then you're off the hook, and the state court must accept the bk court ruling.

>5) If you were my wife's attorney, what would you be doing to
>protect your client from my bankruptcy?

I would need to see what each debt is, so as to deterimine the risk in a hold harmless clause. Also, I'd need to know WA's specific hold harmless case law, because wording in this area probably must be very specific, in terms of what it actually does.

I think that I would contact your bk attorney and try to discover exactly what the scope of the clause is and what the bk attorney believes your risk is, and then triy to reach a settlement that way.

[crayiii]

My BK Attorney said no no no do not sign the hold harmless clause.  

We had the 341 meeting and the trustee asked about divorce proceedings when I told him "yes" he asked what the distrobution was and I told him we had no assets only debts, he said fine that he didn't need any more information and I was done.  My attorney told me that I was finished and again reminded me not to sign the hold harmless clause.

I called my wife's attorney and he told me that he would email the decree and for me to change the hold harmless wording to specifically exclude the discharged debt and to only cover liabilities that happened after our separation.  He said to sign it, send it, and he would file as soon as he could.

Any thoughts on the wording?

 

[socrateaser]

>My BK Attorney said no no no do not sign the hold harmless
>clause.  
>
>We had the 341 meeting and the trustee asked about divorce
>proceedings when I told him "yes" he asked what the
>distrobution was and I told him we had no assets only debts,
>he said fine that he didn't need any more information and I
>was done.  My attorney told me that I was finished and again
>reminded me not to sign the hold harmless clause.
>
>I called my wife's attorney and he told me that he would email
>the decree and for me to change the hold harmless wording to
>specifically exclude the discharged debt and to only cover
>liabilities that happened after our separation.  He said to
>sign it, send it, and he would file as soon as he could.
>
>Any thoughts on the wording?

Under the circumstances, I must defer to your bk attorney. I think that you should have the two attorneys discuss the hold harmless clause and its consequences.

[crayiii]

Thank you for your advice my friend.  I appreciate all you have helped me with!

[crayiii]

Here's the wording:


Each party shall hold the other party harmless from any collection action relating to separate or community liabilities incurred since the date of separation including reasonable attorney's fees and costs incurred in defending against any attempts to collect an obligation of the other party.


Does this sound reasonable?

[socrateaser]

>Here's the wording:
>
>
>Each party shall hold the other party harmless from any
>collection action relating to separate or community
>liabilities incurred since the date of separation including
>reasonable attorney's fees and costs incurred in defending
>against any attempts to collect an obligation of the other
>party.
>
>
>Does this sound reasonable?

As to community obligations, yes, because these are partnership duties. As to separate obligations, no, because the object of a separate duty is for it to be SEPARATE. Why should you be responsible for paying on a debt that your wife has incurred on her own? This defeats the courts distribution of assets and liabilities, and in my view, is a ridiculous provision.

But, the risk is all based upon how the court distributes the assets and debts, because if the distribution demonstrates no risk, then the words of the clause have no substantive use.

Nevertheless, the objective of a divorce is to get loose of the other person, and a hold harmless clause keeps each of you liable to each other. Therefore, I would not sign, especially as to any separate debts.

[crayiii]

I have my 341 meeting today for my chapter 7 bankruptcy.  The settlement papers that my wife's attorney and I stipulated to are sitting on my counter unsigned by me for the following reasons:

1) The debt is all listed as being my responsibility.
2) There is a hold-harmless provision regarding the debt.

My bankruptcy attorney told me not to sign it because the hold-harmless provision could very well make my (marital) debt non-dischargeable.

Here are some facts:

My bankruptcy is in the State of Oregon, a non community property state
The divorce is in Washington State, a community property state
None of the debt is joint debt (wife's name is on none of it)
Some of the credit card debt occurred while we both lived in Washington
We have been separated for almost 2 years
Divorce was filed about 10-months ago
There has never been a request for support

Text of the hold harmless provision: "Each party shall hold the other party harmless from any collection action relating to separate or community liabilities set forth above, including reasonable attorney's fess and costs incurred in defending against any attempts to collect an obligation of the other party"

Here are my questions:

1) After my debt has been discharged, can the state court reassign the debt to me in the decree?

2)  Would the state court see the debt as a liability for my wife even though none of the accounts were joint?

3) If I sign the settlement that lists all of these debts as my responsibility and includes the hold harmless provision, will that supersede the bankruptcy?

4) After the bankruptcy don't the discharged debts cease to be my "obligation" under the hold harmless provision?

5) If you were my wife's attorney, what would you be doing to protect your client from my bankruptcy?

[socrateaser]

All answers assume that you do not sign the settlement prior to your bk being discharged.

>Here are my questions:
>
>1) After my debt has been discharged, can the state court
>reassign the debt to me in the decree?

Your bk cannot be discharged until you and your wife's interest in the various debts are determined. Generally, the bk court will defer to the state court for determinations of property in a dissolution, however, you can ask the federal court to make the determination, and more than likely, your wife will not challenge this, because her attorney is not a bk attorney, and she will have to hire a second attorney to represent her interests in federal court (and, that will fry the boyfriend's beans).

>
>2)  Would the state court see the debt as a liability for my
>wife even though none of the accounts were joint?

Who can say. You were married, but separated. There's lots of facts, such as when the debt was incurred, were you living together, etc. Way too speculative for a conclusion from me.

>
>3) If I sign the settlement that lists all of these debts as
>my responsibility and includes the hold harmless provision,
>will that supersede the bankruptcy?

It will determine the rights of the parties, if you have the stay lifted and the state court signs. You will have to show the bk judge your settlement. Personally, unless you like the deal, I wouldn't sign, because you will probably get a better deal from the bk judge.

>4) After the bankruptcy don't the discharged debts cease to be
>my "obligation" under the hold harmless provision?

If the federal court discharges the debts, then you're off the hook, and the state court must accept the bk court ruling.

>5) If you were my wife's attorney, what would you be doing to
>protect your client from my bankruptcy?

I would need to see what each debt is, so as to deterimine the risk in a hold harmless clause. Also, I'd need to know WA's specific hold harmless case law, because wording in this area probably must be very specific, in terms of what it actually does.

I think that I would contact your bk attorney and try to discover exactly what the scope of the clause is and what the bk attorney believes your risk is, and then triy to reach a settlement that way.

[crayiii]

My BK Attorney said no no no do not sign the hold harmless clause.  

We had the 341 meeting and the trustee asked about divorce proceedings when I told him "yes" he asked what the distrobution was and I told him we had no assets only debts, he said fine that he didn't need any more information and I was done.  My attorney told me that I was finished and again reminded me not to sign the hold harmless clause.

I called my wife's attorney and he told me that he would email the decree and for me to change the hold harmless wording to specifically exclude the discharged debt and to only cover liabilities that happened after our separation.  He said to sign it, send it, and he would file as soon as he could.

Any thoughts on the wording?