Chapter 22 BANKRUPTCY AND FAMILY LAW - s-jt.com

1 22-1 2012 Revision Chapter 22 BANKRUPTCY AND FAMILY LAW TODD TRIERWEILER, , University of Wisconsin Milwaukee, (1978); , Lewis & Clark Law School (1985); member of the Oregon State Bar since 1985; owner, Todd Trierweiler & Associates, Portland. MICHELLE FREED, , Western Washington University, (2000); , Lewis & Clark Law School (2004); member of the Oregon State Bar since 2004; partner, Eblen Freed LLP, Portland.

2 ROSEMARY E. ZOOK, , Nipissing University, (2003); , Western New England University School of Law (2008); member of the Oregon State Bar since 2008; attorney, Todd Trierweiler & Associates, Portland. CHRISTOPHER J. MERTENS, , Macalester College , (2001); , University of Washington School of Law (2006); member of the Oregon State Bar since 2009; attorney, Todd Trierweiler & Associates, Portland. INTRODUCTION .. 22-4 Scope .. 22-4 Where to Find the Law .. 22-7 Creditor s Checklist of Issues .. 22-9 CLASSIFICATION OF FAMILY LAW CLAIMS IN BANKRUPTCY .. 22-16 Secured Claims .. 22-16 (a) Security Agreement .. 22-16 (a)(1) Definition .. 22-16 (a)(2) Debtor and Trustee Powers Against Security Agreements .. 22-17 (a)(3) Undersecured Claims.

3 22-17 (a)(4) Preferences and Fraudulent Conveyances .. 22-21 (b) Statutory Liens .. 22-21 (c) Judicial Liens .. 22-22 (c)(1) Definition .. 22-22 (c)(2) Judicial Liens Against Exempt Property .. 22-22 (c)(3) Nonrenewed Judgments .. 22-24 Chapter 16 / BANKRUPTCY and FAMILY Law 22-2 2012 Revision (d) Unperfected Secured Claims .. 22-25 (e) Unusual Secured Claims Defenses to Avoidance of Judicial Liens .. 22-26 Unsecured Claims .. 22-28 (a) Claims and Nonclaims .. 22-28 (a)(1) Contingent and Unliquidated Claims .. 22-28 (a)(2) Court-Ordered Conduct .. 22-29 (a)(3) Marital Status, Visitation, and Custody .. 22-29 (a)(4) Contempt .. 22-29 (a)(5) Criminal 22-30 (b) Executory Contracts .. 22-31 (c) Dischargeability General Test.

4 22-31 (c)(1) Claim of a Spouse, Former Spouse, or Child .. 22-33 (c)(2) The Proper Source .. 22-34 (c)(3) Nonassignment .. 22-36 (c)(4) In the Nature of Support .. 22-37 (d) Dischargeability Particular Kinds of Claims .. 22-39 (d)(1) Attorney Fees .. 22-39 (d)(2) Claims for Payment of Third Parties .. 22-40 (d)(3) Miscellaneous Claims .. 22-40 (e) Fraud and Other Grounds for Nondischargeability .. 22-41 (f) Procedure .. 22-43 (g) Postpetition Claims .. 22-45 TREATMENT OF FAMILY LAW CLAIMS IN BANKRUPTCY .. 22-45 Secured Claims .. 22-45 Nondischargeable Unsecured Claims .. 22-46 (a) Chapter 11 .. 22-47 (b) Chapter 13 .. 22-48 BANKRUPTCY and FAMILY Law / Chapter 16 22-3 2012 Revision EFFECT OF BANKRUPTCY ON STATE COURT PROCEEDINGS.

5 22-49 Effect of the Automatic Stay .. 22-49 (a) Exception for Alimony, Maintenance, or Support .. 22-49 (a)(1) Collection .. 22-50 (a)(2) Property of the Estate Generally .. 22-50 (a)(3) Pension Assets .. 22-52 (b) Relief from the Stay Generally .. 22-55 (c) Relief for Cause .. 22-59 (d) Abstention and Withdrawal of Reference . 22-61 Effect of Confirmation of a Plan .. 22-63 Effect of Discharge .. 22-64 PLANNING CONSIDERATIONS FOR DEBTORS .. 22-65 Joint Cases .. 22-65 (a) Who Can File a Joint Case .. 22-65 (b) Joint Case Defined .. 22-66 (c) Exemptions in Joint Cases .. 22-67 (d) Ethical Problems .. 22-69 Separate Cases .. 22-71 (a) The Codebtor Stay .. 22-71 (b) Assets of the Estate .. 22-72 (b)(1) Jointly Owned Property.

6 22-72 (b)(2) Involuntary Sale of Jointly Owned Property .. 22-73 (b)(3) Express Trusts .. 22-74 (b)(4) After-Acquired Property .. 22-74 Marital Claims as Assets of the Estate .. 22-75 (a) Third-Party Claims to Set Aside the Judgment .. 22-76 (a)(1) Preferences .. 22-76 (a)(2) Fraudulent Conveyances .. 22-77 (b) Taxation .. 22-79 Chapter 16 / BANKRUPTCY and FAMILY Law 22-4 2012 Revision INTRODUCTION Scope BANKRUPTCY often follows divorce, and BANKRUPTCY can wreak havoc on the expectations of a FAMILY law lawyer. Outside of BANKRUPTCY , the FAMILY law lawyer has a whole range of enhanced enforcement powers, such as continuing wage orders, contempt, and other rights. These rights lead to the expectation that FAMILY law claims have some priority over other claims.

7 BANKRUPTCY , however, is governed by federal law, and when FAMILY law and BANKRUPTCY law conflict, BANKRUPTCY law prevails due to the supremacy clause. US CONST art VI, cl 2; see Perez v. Campbell, 402 US 637, 91 S Ct 1704, 29 L Ed2d 233 (1971) (case involved Arizona s financial responsibility laws for drivers); In re Edwards, 91 BR 95 (Bankr CD Cal 1988) (support modification enjoined). This Chapter discusses how FAMILY law claims are treated differently from other claims in BANKRUPTCY . For BANKRUPTCY law generally, see the references cited in The 2005 BANKRUPTCY Abuse Prevention and Consumer Protection Act (BAPCPA) moved away from terms such as alimony and child support, instead substituting the term domestic support obligation. This new term, defined below, encompasses the former definition of alimony or maintenance, but is somewhat broader.

8 A domestic support obligation is: [A] debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law notwithstanding any other provision of this title, that is (A) owed to or recoverable by BANKRUPTCY and FAMILY Law / Chapter 16 22-5 2012 Revision (i) a spouse, former spouse, or child of the debtor or such child s parent, legal guardian, or responsible relative; or (ii) a governmental unit.

9 11 USC 101(14A). The new domestic support definition is broader in that it: (1) Covers support obligations due after a case is filed. This is particularly important in Chapter 13 cases when a debtor does not receive a discharge unless all postfiling domestic support obligations have been paid current. (2) Allows for the accrual of interest if interest is provided for under applicable nonbankruptcy law. (3) Clarifies that a domestic support obligation includes a debt owed to legal guardians, responsible relatives, or a governmental unit. (4) Clarifies that a voluntary assignment to a nongovernment entity for collections does not change the classification from a support obligation to a dischargeable type of debt. The BANKRUPTCY Code (the Code ) has some limited provisions for FAMILY law.

10 Except for the express provisions set forth below, FAMILY law claims are generally treated the same as other claims in BANKRUPTCY . (1) Married persons may file joint BANKRUPTCY cases. 11 USC 302(a). (2) Collection of support claims is partially exempt from the automatic stay. 11 USC 362(b)(2). (3) The Code defines the extent to which FAMILY law claims are assets of a debtor s estate. 11 USC 541(a)(5)(B). (4) The sale of jointly owned property is regulated free from the claims of the nondebtor spouse. 11 USC 363(h) (j). Chapter 16 / BANKRUPTCY and FAMILY Law 22-6 2012 Revision (5) The power of a debtor to avoid a judicial lien securing alimony, maintenance, or support obligations is eliminated. See (c). (6) Certain obligations incurred incident to property settlements are excepted from discharge.