Once the divorce was final and the distribution of the assets and debt was solidified, the attorney would file bankruptcy for his client and discharge all of the client s debt, including that which he had assumed in the separation agreement. If the debt was joint debt, the creditors only have one other alternative for collection of the debt, the other party to the divorce. The BAP, in a first time ruling on this issue, ruled that the debt assumed by a party in a divorce, is not dischargeable and must be paid by the one who assumed it. There are some very scary changes to the bankruptcy code in Congress under consideration. A Chapter 13 bankruptcy requires the debtor to establish a plan to pay his creditors a portion of what is actually owed them.
Creditors usually have the ability to accept or reject the plan.
This is not good for debtors, since it removes a significant choice in the way to file. Lawyers are unhappy with the potential for a change in the code requiring them to pay the trustee s fees if the creditor is successful in forcing the debtor into a Chapter 13 case. This will certainly cause lawyers to shy away from marginal cases that could be challenged by the creditors. Fewer debts will be dischargeable under the considered legislation. Debts incurred within 90 days of the bankruptcy filing would be nondischargeable.