In a recent Nebraska bankruptcy case, In Re: Kristi Daniel Teed, the court ruled that Ms. Teed could not discharge property settlement obligations which were part of a divorce decree. In this case, Teed and her former husband, Ryan F. Forman, were jointly liable for debt owed to Nebraska Furniture Mart. Originally Mr. Forman filed the complaint under 11 U.S.C. 11 U.S.C. 523(a)(5) which holds that domestic support obligations are non-dischargeable.
After filing the complaint, Mr. Forman also wanted to have the debt declared non-dischargeable pursuant to 11 U.S.C. 523(a)(15) which holds that certain debts imposed pursuant to a divorce decree are non-dischargeable. Pursuant to 11 U.S.C. Section 523(a)(5) debts to a spouse, former spouse, or child of the debtor which is incurred by the debtor in the course of a divorce, separation agreement, or divorce decree are non-dischargeable.
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In fact, the court stated that under current law all debts owed to a former spouse pursuant to a divorce decree are non-dischargeable. The court continued to say that pursuant to 11 U.S.C. 523(a)(5) and Section (15) whether the debt is in the nature of support, property division, or a hold harmless clause, that the debts are non-dischargeable in a Chapter 7 case. In this case there was a provision in the divorce decree which provided that Teed was to pay Nebraska Furniture Mart as well as other credit card debts and that she was to “hold harmless” her former husband regarding these debts.
The court went on to cite the case of Gibson v. Gibson, 219 B.R. 195, 202-203 (B.A.P. 6th Cir. 1998) in which the court stated that “[a] debtor’s obligation as part of a decree or separation agreement … to hold a spouse ‘harmless’ on a third-party obligation [is an example] of incurring a debt which satisfies the qualifying language of 11 U.S.C. Section 523(a)(15). Therefore, because Teed’s divorce decree contained a provision that she would hold her former husband “harmless” on the Nebraska Furniture Mart debt, she had to pay the debt and could not bankruptcy against it. The lesson to be learned from this case is that if you are in the process of a divorce you must be very careful about the obligations which you agree to pay your former spouse probably can not wipe out the debts in your chapter 7 bankruptcy case.