Under the previous rules, an obligation incurred in a divorce could be discharged unless it was for domestic support. The previous rules were modified, presumably at the behest of creditors, because of spouses manipulating the situation. One spouse, lets say the husband, would agree to take certain marital debt while all along planning to discharge it in bankruptcy and leave the creditor with its only option to pursue the wife for payment of the debt. Unfortunately, the wife usually had taken an equivalent amount of debt and was unable to satisfy the debt the husband had been able to discharge.
Pursuant to Section 523 of the United States Bankruptcy Code (as amended by Public Law 109-8 in April 2005), certain exceptions to discharge for debts between spouses as part of a dissolution of marriage proceeding were added. Specifically, Section 523 now provides in pertinent part that:
"(a) discharge under Section 727...of this title does not discharge an individual debtor from any debt... (5) for a domestic support obligation; or (15) to a spouse, former spouse, or child or the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with state or territorial law by a governmental unit."
The bankruptcy courts in interpreting the 2005 amendments to Section 523 have since determined that, "the plain language of the statute provides that all debts, which do not qualify as domestic support, are also (emphasis added) nondischargeable." IN RE: Douglas, 369 B.R. 462 (2007). Further, "…the combination of Section 523(a)(5) and 523(a)(15) excludes from discharge all (emphasis added) marital and domestic obligations, whether support in nature, property division, or hold-harmless requirements,…." Hon. William Houston Brown, Bankruptcy and Domestic Relations Manual, § 1:3 (2006).
Chapter 7 Bankruptcy Attorney