“Divorce, Illness, Unemployment and Overspending. These now are the harbingers of economic doom that spell the end of the ‘good life’ for so many of the economic refugees that seek relief in this ‘Court of Last Resort.’”
–Rice v. Rice, 94 B.R. 617, 218 (Bankr. W. D. Mo. 1988), cited in The Family Lawyer’s Guide to Bankruptcy
The effects of bankruptcy in the context of a divorce changed dramatically with the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). Likewise, The Family Lawyer’s Guide to Bankruptcy has been revised and updated and is the perfect resource for your divorce and family law library. This Guide—a 13-year work-in-progress before the first edition—retains its value as a concise resource for understanding the Bankruptcy Code as it affects divorce and now provides an easy introduction to BAPCPA and a tour of how Congress overhauled the bankruptcy laws, making it more difficult for a debtor to escape divorce-related obligations, complicating the bankruptcy filing process and eliminating some of the benefits of discharge with regards to divorce law.
We understand that many divorces involve disruptions to household income, employment, and health insurance. The struggles for a family with financial issues while living under the same roof become exponentially more difficult after separating into two households in the case of a divorce. For some, bankruptcy will be an inviting concept and viable solution in the case of a divorce. For others, the conceptual benefits will be illusory in light of a divorce. And for still others, the benefits will flow from the spouses filing bankruptcy jointly.
How to make sense of it all as a divorce and family lawyer? And how to minimize bankruptcy surprises affecting our divorce judgments?
The Family Lawyer’s Guide to Bankruptcy leads you through the 2005 legislation and the developing case law, with a focus on how it affects divorcing spouses. While there are detailed notes, annotations and in-depth explanations with regards to divorce law, the Guide seeks to summarize bankruptcy law and highlight areas of importance to divorce practitioners. The authors discuss areas of conflict between the interests of bankruptcy courts and family courts.
The first part focuses on bankruptcy discharge and its exceptions. In the aftermath of a divorce, the most common exceptions are the automatic exception of support debts from bankruptcy cases (Section 523(a)(5)) and automatic exception to discharge for non-support, divorce-related debts from Chapter 7, 11, and 12 cases (Section 523(a)(15)). The authors address how specific obligations such as attorney fees, retirement and property interests, and non-domestic support obligations may be treated in divorce proceedings, and they examine the concept of bankruptcy as a change in circumstances to modify or void awards or the divorce judgment itself.
The second part summarizes the bankruptcy process with special attention to case commencement, the automatic stay, the estate, lien avoidance, priority of support obligations, transfer between spouses and transfer avoidance, executory contracts and dismissal, closing and revocation of discharge. They review the core differences between processing a case under Chapter 7, 11, 12 and 13, and they reveal the issues that may arise from a divorce filed while the bankruptcy case is pending.
Shayna and Bruce Steinfeld include advice on pre-bankruptcy planning and discuss 15 main points with regards to divorce law:
- Make a record of the facts and circumstances leading to a spousal support award.
- Qualify the support award as alimony for IRS purposes and terminate it on death or remarriage.
- Label support as support (not property).
- Create effective liens for both support and property obligations, preferably on previously jointly–owned property.
- Obtain QDROs.
- Include indemnity and hold-harmless provisions.
- Include non-exemption provisions.
- Include a provision for state court jurisdiction.
- Include an interest upon default provision.
- Include a bankruptcy indemnification provision.
- Beware of payments made by the former spouse through a closely held corporation.
- Issue joint letters to credit card companies closing all joint accounts.
- Consider filing a lis pendens against real estate titled to the other spouse at the time of filing the divorce.
- Avoid charging clients for bankruptcy advice.
- Don’t dabble in bankruptcy matters.
Together, the first and second parts consist of a 73-page summary and 18 pages of notes. The 376-page Guide also includes appendices and a CD-ROM with: a 4-page overview of pre-bankruptcy planning for the divorce practitioner; a 22-page discussion of how pre-BAPCPA law under § 523 (a)(15)’s balancing test will affect post BAPCPA analysis; a dictionary of bankruptcy terms; official forms; tax forms; a bankruptcy court directory; exemption statutes by State.
The Steinfelds are married with three children. Shayna is a bankruptcy and reorganization attorney, recognized by the American Board of Certification in Consumer and Business Law. She is a past Chair of the Bankruptcy Section of the State Bar of Georgia and past President of the Atlanta Bar Association. Bruce is a Fellow of the American Academy of Matrimonial Lawyers and a past Chair of the Family Law Section of the Atlanta Bar Association.
The Steinfelds will help you make sense of it all, BAPCPA included, with regards to divorce law. They will help you avoid and minimize bankruptcy surprises in your cases when the clients are going through a divorce. And if you’re really listening, you’ll hear them reminding you to not dabble in bankruptcy matters as a divorce and family lawyer. Leave the bankruptcy filings and processing to an experienced bankruptcy attorney.
Shayna M. Steinfeld and Bruce R. Steinfeld, THE FAMILY LAWYER’S GUIDE TO BANKRUPTCY: FORMS, TIPS, AND STRATEGIES (2d ed., 2008, American Bar Association). $129.95.