Can My Ex-Spouse Discharge the Credit Card Debt He/She Owes Me from the Divorce?
This is the second part to my last article I wrote on whether spousal support can be discharged in bankruptcy. If you missed that article, you can read it here. Credit card debt works differently than a Domestic Support Obligation and there are different rules for this type of treatment.
When you enter into a judgment of divorce that provides your spouse will be liable for debt incurred during the marriage, it means the ex-spouse is really obligated to you for the debt. Under Michigan law, even though you have a valid judgment of divorce, legally you are both responsible for this debt. Usually, there is a hold harmless clause in the judgment that provides if the debt collector comes after you, then you can go after your ex-spouse for the their portion of the debt. the creditor will not be bound by the judgment of divorce because they were not a party that agreement. So, legally the creditor can and will collect from you. Your only recourse is to collect from your ex-spouse by enforcing the judgment of divorce.
Under section 523(a)(15), property settlements are protected by the bankruptcy code. Division of marital debt falls under property division. This section of the code states that property settlement obligations are not dischargeable under Chapter 7. that means your ex-spouse will not be able to get out of their obligation to you by way of chapter 7. However, they may be dischargeable under a Chapter 13. Under a Chapter 13, this is an unsecured debt and your ex-spouse will pay you a portion of what they owe you, then the balance will be discharged upon completion of the Chapter 13 plan. So, let's say your ex-spouse owes you $10,000 for their portion of the debt under the judgment of divorce. They file a Chapter 7, they will still owe you $10,000 after they get their Chapter 7 discharge. If, however, they file a Chapter 13 and they pay you $1,000 under the plan (10% plan payment to the unsecured creditors), then the remaining obligation ($9,000) will be discharged and you cannot collect from your ex-spouse, even if the judgment of divorce says that this debt is not dischargeable.
One thing to keep in mind, if your ex-spouse files for Chapter 7 or Chapter 13, their obligation to the creditor will be discharged. That means the creditor cannot collect from your ex-spouse, but they can collect from you (regardless of what the judgment of divorce states). Your only recourse again, is to collect from your ex-spouse (assuming their obligation to you was not discharged under Chapter 13).
This is why it is important when going through the divorce process, your attorney understands the implications between family law and bankruptcy law. The bankruptcy court will look to the judgment of divorce and state law to determine if this debt is a Domestic Support Obligation or property division. If you have any questions, feel free to call your Metro-Detroit Divorce Lawyer for a free consultation to see how this intersection of the two areas of law may affect you. In Macomb County, call (5686) 439-4297, extension 0. In Oakland County, call (248) 581-0598 extension 0.