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Not all attorney fee awards in divorce proceedings are domestic support obligations in Bankruptcy Court
May 19, 2009
Topic: Bankruptcy
In the recent case of In re Lopez (2009 WL 1064581, Bankr. S.D. Fla. 2009), the court held that attorney fees awarded in a dissolution proceeding were not a domestic support obligation entitled to an unsecured priority claim once in bankruptcy. Although attorney fees in divorce proceedings often are domestic support obligations, this ruling highlights the complexities of the overlap between bankruptcy and family law.
While state courts may undertake a simple inquiry as to whether a debt is classified as support, the determination in bankruptcy proceedings is ultimately controlled by Section 507(a) of the Federal Bankruptcy Code as defined in 11 U.S.C. § 101(14A). Florida Statutes Section 61.16 governs the awards of attorney fees in state divorce proceedings; however, Section 61.16 is not the only basis a family court can rely on. In the present case, the court specifically stated that the awarding of attorney fees was based on the "bad faith litigation misconduct" of the wife (debtor in the bankruptcy proceeding) and not the financial resources of the parties and their respective ability to pay. As a result, these fees fell outside the scope of domestic support obligations as defined by the Federal Bankruptcy Code and were ruled not to qualify for an unsecured priority claim.
This ruling demonstrates the overlapping interplay between bankruptcy and family courts as well as the complexities of the relationship between state and federal law, and reinforces the need for careful planning and experienced counsel in approaching such matters. Many family law attorneys run away from handling matters that involve bankruptcy. At Arnold & New we offer experienced family law and bankruptcy counsel all in one, full service firm. Please contact us directly to discuss your family law and bankruptcy needs.
