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Helton Law Firm, PLLC

Some property settlement agreements not alimony

When some Tennessee couples divorce, they may enter into property settlement agreements. If the agreement contains a provision that one party will pay the other alimony, the support will not be dischargeable if the payor later files for bankruptcy. Not all obligations will count as alimony, however, and certain types of debts incurred by one to the other will be dischargeable.

In June, a U.S. bankruptcy court in Virginia found that an agreement with an indemnification provision did not amount to a domestic support obligation. The case involved a couple that divorced in 2009. At the time of their divorce, the husband and wife reached an agreement in which the husband would get the marital home. He agreed to make the payments and to keep the property in good repair. He was also supposed to refinance the home in his own name.

When the man failed to make the payments, he tried to sell the home. It didn't sell, and he was unable to refinance it in his own name. He filed for a petition for Chapter 13 bankruptcy. The former wife filed a suit objecting to the discharge of the debt that he owed her for the home. The court found that the indemnification clause did not create an obligation for domestic support since the couple had also included language specifically waiving all rights to seek spousal support or alimony.

The division of marital property in divorce cases may be complicated. In many cases, however, the estranged spouses are able to negotiate a settlement agreement with the help of their family law attorneys.

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