Monday, September 21, 2009

Concurrent Jurisdiction with Family Law Court

Bankruptcy court authority in the domestic relations area is limited. Bankruptcy courts lack authority to grant divorces, decide custody or award support. However, bankruptcy courts have statutory authority to decide certain other issues relating to bankruptcy discharge determinations and exceptions to discharge for support and property settlement obligations. More specifically, bankruptcy courts must determine: (1) whether an obligation is in the nature of alimony, support or maintenance as a matter of federal bankruptcy law, and (2) whether certain property settlement obligations are dischargeable in bankruptcy. These statutory directives put bankruptcy courts into a role that appears to contradict traditional federal noninvolvement in domestic issues. But, it is a role that should be limited in scope.

Some courts have taken the position that state courts and bankruptcy courts have concurrent jurisdiction when “dischargeability” issue arises under Section 523(a) and 523(a)(15) of US Bankruptcy Code. A state court may be allowed to make its own determination as to dischargeability if the divorce case is filed after the bankruptcy case has been closed. However, if the divorce case is filed before the bankruptcy case is filed then the state court would seldom have an opportunity to determine dischargeability. However, a state court’s holding on certain issues may have a substantial impact on a dischargeability issues rising in a bankruptcy case filed after the divorce decree has been entered. More specifically, a state court’s factual finding in a divorce decree as to alimony, maintenance, support, and property settlement may have strong, if not preclusive, effect in a later dischargeability determination in the bankruptcy proceeding. Source: American Bankruptcy Institute.

Warmest Regards,

Bob Schaller

Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm

Bob is a member of the National Bankruptcy College Attorney Network, American Bankruptcy Institute and the National Association of Consumer Bankruptcy Attorneys.

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