Wednesday, December 3, 2014

Bankruptcy and Divorce

Bankruptcy and divorce unfortunately seem to go hand in hand.  Many people get used to living on two incomes and then cannot get by on just one income after a divorce.  So, what affect does bankruptcy have on the items agreed to in a divorce?  The answer is very little.  This was illustrated in Mosley v. Smith decided by the Court of Appeals yesterday.  A link to the opinion is here.  The case dealt with an unpaid car note.  The divorce decree had a hold harmless provision in it regarding the debt.  The husband discharged the debt in bankruptcy and the wife was sued for the amount as a result.  The husband tried to argue the bankruptcy discharged the debt or alternatively that the seven (7) year judgment statute of limitations applied to bar her claim.  The Court of Appeals said no noting that the bankruptcy did not discharge the Husband's debt to the wife by way of the hold harmless agreement and that the seven (7) year judgment statute did not apply because the wife was only sued on the debt five (5) years ago at the time of the trial. 

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