Attorney fees properly discharged under bankruptcy law in family law matter

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In Bendetti v. Gunness, 2014 DJDAR 623 (2014), the US Bankruptcy Appellate Panel (“BAP”) for the Ninth Circuit Court of Appeals affirmed the bankruptcy court’s decision. The bankruptcy court ruled that an attorney fee award was properly discharged under federal bankruptcy law.

Patricia Gunness filed for bankruptcy. The bankruptcy petition was filed as she and her husband owed more than $280,000 in attorney fees to the husband’s ex-wife from a judgment rendered in a fraud case.

The wife filed an adversary proceeding against the ex-wife, seeking to discharge the debt. In response, the ex-wife argued that the debt was not dischargeable because it constituted a “support award” under controlling Bankruptcy Code provisions.

The wife filed a motion for summary judgment, arguing that the attorney fee award was not a “support award” as a matter of law under Bankruptcy Code Section 523(a)(5). In granting the summary judgment motion, the bankruptcy court determined that a family relationship was required to protect a debt from discharge.  The bankruptcy court reasoned that because there was no familial relationship between the current wife and the former spouse, the provisions of Section 523(a)(5) did not apply.

The BAP affirmed the decision of the lower court. The BAP noted that under Section 523(a)(5), certain debts are not dischargeable, such as those claims for alimony, maintenance, or support. However, that provision requires that the “spouse, former spouse, or child of the debtor” must be owed the money as a prerequisite to protect the debt from dischargeability.

The BAP concluded that because neither the ex-wife nor her lawyer was a “spouse, former spouse, or child” of the current wife, the provisions of Section 523(a)(5) did not apply. The BAP affirmed the decision of the bankruptcy court.

 

Topics:  Attorney's Fees, Consumer Bankruptcy, Divorce, Fraud

Published In: Bankruptcy Updates, Civil Procedure Updates, Family Law Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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