Ex-Spouse Ordered to Turnover Unpaid Divorce Decree Obligations to Trustee Despite Inability to Pay

In Gallo v. Emery, 573 F.3d 433 (7th Cir. 2009), debtor initiated a chapter 13 bankruptcy case after the completion of state court divorce proceedings. The divorce court had required debtor’s ex-spouse to pay debtor $125,000 under the Illinois circuit court’s dissolution judgment. Debtor’s ex-spouse did not pay the judgment amount prior to debtor filing bankruptcy.

After filing bankruptcy, debtor filed a motion under §542(b) seeking an order requiring the ex-spouse to pay the chapter 13 bankruptcy trustee the amount that the ex-spouse owed debtor under the Illinois circuit court’s dissolution judgment. The ex-spouse opposed the motion on the ground that the ex-spouse did not have the ability to pay the $125,000. The bankruptcy court rejected the ex-spouse’s argument and entered an order directing the ex-spouse to pay to the trustee the $125,000. The district court affirmed.

The issue before the 7th Circuit was whether the bankruptcy court erred in ordering the ex-spouse to turnover the $125,000 to the chapter 13 trustee despite the ex-spouse’s alleged inability to pay the $125,000. The ex-spouse argued that the bankruptcy court erred in ordering the turnover because the court failed to establish that the ex-spouse had the ability to pay the payment.

The 7th Circuit affirmed the bankruptcy court’s order requiring the turnover of funds. The 7th Circuit held that the bankruptcy court had no obligation to ensure the ex-spouse’s ability to pay the judgment before granting the turnover motion. The 7th Circuit distinguished between turnover motions and contempt of court motions; the inability to pay is not defense to a turnover motion, but the inability to pay could be a defense to a later contempt of court motion.


Warmest Regards,

Bob Schaller


Your Bankruptcy Advisor Blog
By: Attorney Robert Schaller (Bob's bio) of the Schaller Law Firm
Click for Bankruptcy Lawyer Job Opportunities.

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

I encourage you to SUBSCRIBE to this blog by completing the box to the right of this post so you will automatically receive future blog postings. Next, you can review past and future blogs at any time by clicking the "archive" link in the column to the right of this posting. Plus, you are invited to submit a question by utilizing the "question" box in the column to the right of this posting.


For information about Chapter 7 bankruptcy Click Here

For information about Chapter 13 bankruptcy Click Here

You are invited to contact Attorney Schaller at 630-655-1233 or visit his website at http://www.schallerlawfirm.com/to learn about how the bankruptcy laws can help you.

NOTE: Robert Schaller looks forward to the opportunity to talk with you about your legal issues. But please remember that all information on this blog is for advertising and general informational purposes only. Please read Bob's disclaimer.

I recommend that you review a few other blogs that may be of interest to you. These blogs are identified in the right column and are set forth below: bankruptcy issues blog; bankruptcy and family law issues blog; bankruptcy and employment issues blog; and bankruptcy and student loan issues blog.