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Is a Property Settlement Agreement Dischargeable in Bankruptcy?

Norma Duenas

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Chapter 13 Bankruptcy Articles | Learn About Chapter 13

Is a Property Settlement Agreement Dischargeable in Bankruptcy?If you have been through a divorce and there was some assets involved then chances are that you entered into a property settlement agreement. As part of your agreement you may have had to provide a payment to your ex-husband or ex-wife over the course of time or in a lump sum payment after the sale of an asset. What happens if you end up in debt over your head and do not have the money or assets to cover the settlement agreement. Can you file for bankruptcy and get rid of he property settlement agreement.

The first think to look at if whether this is truly a property settlement agreement or whether it is structured as alimony or support payments owed to your ex-spouse. If the agreement is in the form of alimony or support payments then you will not be able to discharge this debt in bankruptcy. Neither Chapter 7 or Chapter 13 will allow you to eliminate alimony or child support payments owed. Whether an agreement is considered a support obligation or a property settlement will be based on a number of factors such as whether it is being paid over time or as a lump sum, does it terminate after a certain even and whether there was a need for support at the time of the divorce.

If the debt is a property settlement agreement then you may be able to discharge it in a Chapter 13 bankruptcy. Chapter 13 bankruptcy allows you to get rid of the property settlement agreement. Of course your ex-husband or ex-wife can try to fight it by trying to establish that the debt owed is actually intended as a support obligation or alimony rather than simply a division of assets.

If you file for Chapter 7 bankruptcy the property settlement agreement will not be discharged as part of your bankruptcy. Under the new laws property settlement agreements are for the most part non-dischargeable in Chapter 7 bankruptcy.

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