Thursday, December 31, 2009

Attorney Fees Owed to Family Law Attorney Not Discharged in Bankruptcy

A law firm had represented a wife in a divorce proceeding. At the conclusion of the divorce case, the divorce court entered an order awarding the ex-wife $85,000 in attorney fees and directed the debtor/husband to pay the attorney fees directly to the ex-wife’s law firm.

Debtor/husband did not pay the attorney fees; instead, he filed a chapter 7 bankruptcy case and received a chapter 7 discharge. In response, the law firm filed an adversary proceeding against debtor/husband and sought an order excepting the $85,000 attorney fee debt from discharge. Clair, Griefer LLP v. Prensky, 416 B.R. 406 (Bankr. D.N.J. 2009).

The issue before the Prensky court was whether attorney fees awarded to debtor’s ex-wife, but payable directly to the ex-wife’s law firm, are dischargeable under §523(a)(15). Debtor/husband asserted that the attorney fee debt was dischargeable because the debt was not a debt owed to a “spouse, former spouse or child” as required for non-dischargeability under §523(a)(15). Debtor/husband urged the court to adopt a “plain language” interpretation of the §523(a)(15) clause “spouse, former spouse, or child” and find the attorney fee debt dischargeable because the debt was payable to the law firm and not to the spouse, former spouse, or child.

The Prensky court rejected debtor’s argument. The court found that the $85,000 attorney fees were divorce-related debt incurred by debtor in the course of the divorce proceedings between the debtor and ex-wife and were thus non-dischargeable pursuant to §523(a)(15). Key to the court’s decision was the fact that the divorce court awarded attorney fees to the ex-wife, not to the law firm. The court noted that, pursuant to the divorce order, the attorney fee debt was owed to the ex-wife but payment was ordered to be made directly to the ex-wife’s law firm. The court further commented that state law gave the ex-wife the legal right to enforce the award of attorney fees in the event the legal fees were n not paid. In short, the court believed that the attorney fee debt was owed to a “spouse, former spouse, or child” as required by §523(a)(15) and that the divorce order directing the payment to be made directly by debtor to the law firm had not changed the fact that the debt was still owed to a “spouse, former spouse, or child.”

Warmest Regards,

Bob Schaller

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By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
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