Divorce Lawyer Fees in Bankruptcy
One of life's unfortunate realities is that traumatic events often come in pairs. Divorce, for instance, can often lead to bankruptcy for a family that is financially unprepared for the cost of getting a divorce, and for establishing their new lives. This leaves many Americans wondering what happens to divorce lawyer fees in bankruptcy.
The answer varies from case to case and depends on the specific details of a bankruptcy filer's position. If you'd like to learn more about your situation, you can take this opportunity for a free legal consultation with a bankruptcy lawyer near you.
Are Divorce Lawyer Fees Dischargeable in Bankruptcy?
In recent years, a number of court cases have addressed this issue. In them, bankruptcy courts have set out the following rules for divorce fees in bankruptcy:
- Divorce lawyer fees may be dischargeable. Under ordinary circumstances, legal fees are dischargeable in bankruptcy court (even bankruptcy attorney fees may be discharged in Chapter 13, though not Chapter 7). They are unsecured (that is, not attached to any property) and usually not considered a priority debt. However, there are some exceptions to this rule.
- Intent to pay matters. Taking on divorce attorney fees with the deliberate intent to file bankruptcy to discharge those fees is not permitted. Just as bankruptcy filers cannot discharge credit card debt for the purchase of luxury goods in the period directly before a bankruptcy filing, they cannot accumulate significant legal debt and file bankruptcy specifically to discharge that debt.
- Divorce lawyer fees are not considered spousal support. A bankruptcy court in Florida ruled in 2009 that a spouse's divorce lawyer fees are not considered a form of spousal support (as alimony would be, for example). Because of this ruling, the court indicated that the divorce lawyer debts were non-priority and so the filing spouse did not have to repay them in full.
Divorce Lawyer Fees in Chapter 13 & Chapter 7 Bankruptcy
Another factor that will affect the repayment of divorce lawyer fees is what type of bankruptcy a person files.
- Chapter 7 bankruptcy: In Chapter 7, the court completely discharges (that is, forgives) a filer's eligible unsecured debt. Because legal fees are not connected to property, they qualify as unsecured, and can typically be completely eliminated.
- Chapter 13 bankruptcy: In Chapter 13, the filer makes partial or full payments to her creditors over a period of three to five years with the help of a court-approved repayment plan. Because legal fees are generally not considered priority debts, most repayment plans would allow for a only partial repayment.