One change brought by BAPCPA made the choice of chapter in bankruptcy much clearer: the amendment of §523(a)(15). Read with §523(a)(5), now all debts to a spouse, former spouse or a child, incurred in connection with a divorce or separation are non dischargeable in Chapter 7.
To see what’s dischargeable in Chapter 13, you need to go to § 1328(a). All debts provided for by the plan are dischargeable, it begins, except….. Lo and behold,§523(a)(15) is not one of the exceptions to the 13 discharge.
Thus Chapter 13 can discharge the debtor’s obligation to pay a former spouse to equalize the division of marital property. Twice in the past year, that’s been of critical importance to my clients who were awarded the family home and an obligation to pay the other for the equity in the house at the time of the divorce. Enter the housing crash, and the house is no longer worth paying for equity that is not there. Chapter 13 was the answer.
Support remains non dischargeable in either chapter. Decisions have further defined support to include the attorneys fees payable to the supported party to get the support order as well.
Before 2005, §523(a)(15) allowed for the discharge in 7 of non support debts arising out of a divorce if the equities favored the debtor. No longer do we have to assess the likelihood that the debtor is more needy of the discharge than the ex is of the property settlement.
It’s a bright line, now.
Image courtesy of NASA.