Support Alimony Family Law Matters

New Jersey bankruptcy attorney explains how to determine when one spouses asset is considered another spouses bankruptcy asset.

One criteria of a New Jersey chapter 7 bankruptcy filing is the value of the filing person’s assets. A person is entitled to a fresh start in a chapter 7. The fresh start allows a person to keep a certain amount of property to move forward with their life. However, there is a limit as to the amount of assets a person may own. Although, very unusual, if the value of the person’s assets is beyond the acceptable amount, the trustee may sell certain assets or a portion of various assets. The property that a person may keep in a chapter 7, is determined by bankruptcy exemptions, which is explained, in detail, in numerous other blogs.
Also, the value of a person’s assets may increase the amount that must be paid to creditors in a New Jersey chapter 13 bankruptcy case. If the debtor has substantially valued assets, he may be required to pay more money towards his general unsecured debt, such as credit cards and personal loans. The analysis as to whether a debtor must pay more money in a chapter 13, as a result of owning valuable assets, is based on the same application of exemptions that is used in a chapter 7 case.
Typically, the bankruptcy court and the trustee determine which assets the debtor owns by way of the legal instrument reflecting ownership of the specific asset. For example, the individuals on a deed reflects the ownership of that property and the individuals on an automobile title reflects the owners of the car. Furthermore, the person whose name is on an investment account, is the owner of the account and the individual’s name that is reflected on a bank account, owns the money in the account. However, there may be numerous exceptions to this rule. An example of one possible exception, is using all of Mary’s money to buy a house that is solely in the name of John.
Another exception to the typical determination as to who owns an asset pursuant to New Jersey bankruptcy law, is as follows. In a New Jersey divorce, a husband may be entitled to his wife’s asset, even though the asset is solely titled in his wife’s name. Per New Jersey family law, one spouse may have a right to a partial interest in the other spouse’s asset, although no portion of the asset is titled in that particular spouse’s name. However, please note that the ownership rights to various marital property depends on various factors and that one spouse may not have an interest in the other spouses asset, as a result of marriage. Typically, under New Jersey bankruptcy law, the right of such an interest is triggered after the filing of the divorce complaint.
For example, Mrs. Smith is the sole owner of an investment that she acquired during the marriage. Mr. Smith has a one half interest in the investment, under family law, and only he files for chapter 7 bankruptcy protection, two days after she filed a divorce complaint. Under this scenario, the chapter 7 trustee will consider as a bankruptcy asset, all  of Mr. Smith’s interest in Mrs. Smith’s investment. Therefore, if he is entitled to 50% of her $50,000.00 investment, pursuant to family law, his chapter 7 trustee will bring his $25,000.00 interest into his bankruptcy estate, for analysis. Mr. Smith may apply his applicable exemptions to the $25,000.00, which may result in the trustee disbursing all or a portion of the funds to creditors. Please note that there are numerous exceptions to the above examples.
Robert Manchel, Esq., may be contacted, at 866 503 5644, to discuss all of your bankruptcy questions for the State of New Jersey.

The 2005 bankruptcy code amendments resulted in stricter protections for individuals entitled to receive payments for support, alimony, equitable distribution, maintenance, etc. In other words, it is more difficult to eliminate such debt.
A chapter 7 debtor may not eliminate or discharge any debt that is due to a spouse, ex-spouse, or child, for support, alimony or maintenance. Maintenance includes any funds or property that is used for the support or sustenance of an individual.
In addition, a chapter 7 debtor may not eliminate or discharge equitable distribution, under certain situations. Equitable Distribution is typically the acquired assets, such as money and property, or a liability, such as marital debt, incurred during the marriage. Typically, bank accounts, real estate, and autos that were acquired during the marriage, which is distributed at divorce is deemed equitable distribution. Also, joint or personal debt acquired during the marriage, that is ordered to be paid by a spouse, as part of a divorce, is deemed equitable distribution.
A debtor’s Equitable distribution debt may not be discharged or eliminated in a chapter 7, if the debt is due to a spouse, former spouse, or child of the debtor and incurred by the debtor in the course of a divorce or separation, or in connection with a separation agreement, divorce decree, or other order of a court.
Typically, the issue in a chapter 7, is whether the debt is actually support, maintenance, or equitable distribution.
A chapter 13 debtor must pay, and may not eliminate, a spouses obligation to pay any support, alimony, or maintenance. Any support, alimony or maintenance arrears,due at the time of the filing, must be paid through the chapter 13 plan payment, in additional to payment of all future monthly payments for such debt. If the debtor is not current with all such payments, he will not obtain a chapter 13 discharge. At the end of the plan, the debtor must file a document that indicates all post filing payments were paid in full.
If the debtor is unable to pay all arrears through the bankruptcy plan, in addition to all post filing monthly payments, at any time during the case, the debtor will not be able to proceed with the chapter 13 case. This means that if the debtor has insufficient funds to pay all support arrears, through a 60 month bankruptcy plan, in addition to making the monthly support payments, the debtor will not be permitted to proceed with the case, no matter the reason for the filing.
The main difference between a chapter 7 and 13, regarding marital debt, is that a chapter 13 debtor is permitted to eliminate and discharge equitable distribution, no matter when and how the debt was incurred, with very limited exceptions. This means that any debt that is deemed equitable distribution may be eliminated, if the debtor does not have the ability to pay such debt, in a chapter 13.
Robert Manchel is a bankruptcy attorney in NJ., who is available to answer your questions at 866 503-5655

In 2005, the bankruptcy code was modified. A portion of the code was modified to include additional protections for creditors that are due child support from bankruptcy debtors. The bankruptcy code requires trustees to provide additional notice of the bankruptcy filing to such creditors. Also, the code was modified to reflect that child support recipients are the first creditors to be paid from any proceeds that are obtained by a chapter 7 trustee from the sale of a debtors’ assets.
A New Jersey chapter 7 bankruptcy filing does not effect or change the obligation to pay child support and will not eliminate the debt. In other words, if the debtor owes child support, the same amount that is due prior to the filing will be due after the chapter 7 is complete. Also, if the debtor filing a chapter 7 owes child support, the bankruptcy filing will not stop the spouse, who is entitled to the support, from filing court papers requesting to enforce or modify the child support.
A New Jersey Chapter 13 requires the debtor to pay through the monthly plan (trustee) payment the total amount of the pre filing child support arrears. In addition, the debtor is require to pay the regular monthly and ongoing support payments to the recipient. The only exception is when the child support recipient agrees to the payment in another fashion.
The support arrears must be paid through the chapter 13 plan, no matter why the case was filed. In other words, a debtor may file a chapter 13 to save their house without any thought of their child support arrears. Under this scenario, in addition to payments on their mortgage arrears, the debtor must also pay the support arrears, through the monthly plan payments, and maintain sufficient income to pay the plan payments. If the debtor cannot afford the plan payments that include the support arrears, the case will likely be dismissed.
Additionally, a chapter 13 debtor is not entitled to a discharge after completion of all monthly plan payments, if the debtor is not current with all child support payments that were due from the date of the filing to the date of the completion of the plan.
If you are interested in learning more about how bankruptcy effects child support, you many contact the experienced New Jersey Bankruptcy Lawyer, Robert Manchel at 866.503.5655.