NJ Court Rules Prenuptial Debt Non-Dischargeable in Bankruptcy

by Admin on March 27, 2014

Divorce ArgumentAccording to the National Law Review, the New Jersey Bankruptcy Court has issued a landmark decision regarding the ability to discharge debts pursuant to a prenuptial agreement in a bankruptcy proceedings. In the case DeStephano and his fiancé, Mrs. Fowler, entered into the prenuptial agreement (the “Agreement”) whereby DeStephano agreed that, should he and Fowler separate, DeStephano would pay her the following Property Settlement Payments:

(1) $12,000 within 30 days of termination;

(2) $1,000 per month for a period equal to the number of months that the relationship lasted beginning on June 6, 2002; and,

(3) $27,000 as repayment of monies loaned to the Debtor plus accrued interest.

The Agreement further stated that Fowler was “giving up all rights to … alimony and to equitable distribution…”

In December 2010, Fowler filed new State Court proceedings to enforce the terms of the Agreement; however, those proceedings were stayed after DeStephano filed for Chapter 7 Bankruptcy protection under the Code.

DeStephano listed Fowler as a creditor who was claiming she was owed $300,000.00, although he also indicated that he disputed her claim.

The Bankruptcy Court determined that the payments owed to Mrs. Fowler were, in fact, non-dischargeable in bankruptcy proceedings.

The Bankruptcy Court refused Fowler’s request to have the legal fees incurred in the bankruptcy proceedings deemed a non-dis-chargeable debt.

Joe Leeds, managing partner of Thailand law firm Chaninat & Leeds commented, “In US Federal bankruptcy proceedings, certain classes of creditors are given priority and paid before other classes of creditors.  However some debts are non-dischargeable. Debts fund may be non-dischargeable include tax debts, student loans and also child support and spousal support. Frequently, in Thailand prenuptial agreements, clients request us to provide waivers of child support and spousal support.”

Read the whole article here

Flickr photo credit – Ed Yourdon

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Thailand Divorce Law

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