Divorce Debts and Bankruptcy

Posted by on Dec 9, 2014 in Bankruptcy | 0 comments

Divorce Debts and Bankruptcy

This post is not intended to be legal advice.  It is general advice for the State of Georgia only.  Please consult an attorney if you need to address this situation.

 

When couples get divorced, many times they assign who pays what debt in their settlement agreement. Many times the person assigned to pay that debt isn’t able (down the road) to pay it and has to file for bankruptcy.

 

In Georgia, in a Chapter 7, that person’s responsibility for paying that debt is discharged when they receive their bankruptcy discharge. However, their responsibility toward their ex-spouse, now that the ex has to pay it in full, is NOT discharged. The ex can be sued by the creditor for the full amount of the debt and the ex can turn around and sue the person who filed for bankruptcy, as most settlement agreements have an indemnification clause (meaning if they get sued because of something you did, you get to pay them for their costs).

 

In Georgia in a Chapter 13, that scenario is taken out of the picture. Chapter 13 in Georgia offers what we call a “super discharge,” meaning any debts in the nature of property settlement are extinguished upon the bankruptcy discharge. Alimony and child support are not dischargeable in bankruptcy in Georgia, so those amounts stay in place.