Can a Bankruptcy Trustee Avoid a Divorce Settlement?
The answer will depend on all the facts involved, such as whether you filed Chapter 7 or 13, and whether the assets and liabilities you listed in bankruptcy or separate or marital property. The non-dischargeable debts listed in § 523 include, among others, alimony, child maintenance or support, and certain debts arising out of a divorce decree or separation agreement.
A broader range of debts are dischargeable under Chapter 13, including debts arising from property settlements in divorce or separation proceedings. A "divorce lien" is a lien against the marital home held by the ex-spouse not in possession of the home. The question of whether the lien avoidance provision of the Bankruptcy Code applies to divorce property divisions' is unclear due to the variety of theories courts have used to support decisions.
In Chapter 13, the trustee is responsible for receiving monthly payments and disbursing them to creditors in accordance with your repayment plan. The trustee will review the proposed divorce settlement agreement along with the incomes of each spouse before deciding if the divorce settlement is acceptable.
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