Comments on Bankruptcy and Equitable Distribution
August 8, 2017 § 3 Comments
Yesterday I posted about the Powell bankruptcy case and how it addressed the handling of equitable distribution in divorce when there is a pending bankruptcy proceeding. As promised, here are my thoughts:
- I have heard it said that Powell is a big change fraught with implications for family law practitioners, but I don’t see that. The language cited from Professor Bell clearly states what the law has been. Powell does not change that.
- Some may have misinterpreted the federal domestic relations exception barring federal courts from exercising jurisdiction over divorce to mean that all matters incidental to a divorce are included. The US Supreme Court, however, has made it clear that it is the granting of the divorce itself that is barred. Any matters pertaining to the property of the bankruptcy debtor are subject to bankruptcy jurisdiction.
- The only way that a chancellor may proceed in divorce after bankruptcy is filed is for you to lift the automatic stay. You have to petition the bankruptcy court to remand all of the issues, as Jessica Powell did, even knowing that some will not be remanded.
- Only problem is, per Heigle, cited in the Powell opinion, our supreme court has made it clear that the chancery court should stay all proceedings before it until the bankruptcy is concluded.
- Even without Heigle to stop you from going forward, it’s obvious that if the bankruptcy estate is taken away, equitable distribution is impossible. If equitable distribution is impossible, alimony is impossible, since you can’t get to alimony without going through equitable distribution. If most of the assets are in the bankruptcy estate, that may well limit or even eliminate child support.
- As I mentioned yesterday, I am no bankruptcy expert, but it appears that if you represent the other spouse (not the debtor), you had better file a claim for him or her in bankruptcy court right away to protect that client’s rights. You need to ask a bankruptcy expert about this.