Bankruptcy

Divorce Attorney?s Fees Not Dischargeable in Bankruptcy; Debtor Intended to File Bankruptcy All Along

By Craig Andresen, Minnesota Bankruptcy Attorney

A Georgia bankruptcy court has ruled that a chapter 7 debtor could not discharge $35,625.00 in fees owed to her divorce attorneys.  In re Bucchiarelli, 2010 WL 2033146 (Bky.N.D.Ga. Feb. 22, 2010), held that the debtor had planned on filing bankruptcy before hiring her divorce attorneys, and that she never intended to pay them for their services.

The debtor’s friend, who had testified on her behalf in the divorce trial, testified to the bankruptcy court that the debtor never had any intent to pay the divorce attorney fees.  She further testified that the debtor had formed a plan to file bankruptcy after her divorce, for the specific purpose of discharging her divorce attorney fees.

The debtor’s divorce attorneys had responded to the subsequent bankruptcy filing by asking the bankruptcy court not to discharge the fees owed for the divorce.  They alleged that the debtor’s conduct made the debt nondischargeable under bankruptcy code section 523(a)(2)(A), because the fees were incurred by “false pretenses, false representation or actual fraud.”

The bankruptcy court found that the divorce attorneys had reasonably relied on the debtor’s promise to pay for their services provided in the divorce case, even though they knew that the debtor was in financial difficulties at the time.  The debtor had promised to pay them from the recovery of 401(k) funds obtained in the divorce, and the attorneys had no reason not to believe her.

While the debtor’s false statements to her divorce attorneys supported denial of discharge of this $35,625.00 debt, the court declined to award attorney fees for pursuing the bankruptcy nondischargeability case, as no evidence had been presented regarding the fees incurred in doing so.

Full post as published by Bankruptcy Law Network on June 17, 2010 (boomark / email).