- March 16, 2015
- Thomas Adam
The bankruptcy effect on divorce
It’s been said that two things can make ordinarily rationale individuals act crazy: love and money. It is not surprising then that when bankruptcy and divorce are combined the results can get, well, interesting. Such was the case in Morales v. Giddens, an adversarial case arising from the bankruptcy effect on divorce regarding Christopher Giddens.
Christopher Giddens and Marta Morales divorced in 2008 after ten years of marriage. The two agreed to a settlement and a judgment of divorce was entered awarding Morales a lump sum as well as property including vehicles and furniture. Giddens was less than happy with the award, but instead of complying and complaining to his friends like the typical divorcee, he went through almost extreme efforts to prevent Morales from collecting the award. For example, he didn’t turn over the household furniture awarded to Morales until he spent time in jail for contempt.
Following the divorce, Giddens began a romantic relationship with Agnieszka Materna, a loan officer, who true to her profession, loaned Giddens $20,000 (it was a personal loan for investing in a property Giddens planned to flip). Not surprisingly, Giddens didn’t pay back the loan nor did he include Materna on his creditors schedules. Creditors schedules are mandatory lists of creditors that individuals declaring bankruptcy are required to fill out to ensure that creditors have an opportunity to protect their interests, to the extent possible, during bankruptcy proceedings.
Upon learning of the bankruptcy proceedings, Morales filed an adversary proceeding seeking to have the debt Giddens owed her under the divorce judgment declared non-dischargeable, meaning that at the end of the proceedings, any remaining balance would still be owed to Morales. In support of her request, Morales cited a few different subsections of 11 USC 523 the section of the Bankruptcy Code that lists exceptions to discharge.
The court was persuaded on one ground, that under 11 USC 523(a)(2)(A), Morales’ debt was non-dischargeable. That subsection provides that monetary debt is non-dischargeable if obtained by “false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition.” The bankruptcy court reasoned that Giddens conduct and statements clearly indicated that he had entered into the settlement agreement with no intention of ever paying his debt, in other words, his debt was incurred as a result of fraud.
Interestingly, one of the witnesses against Giddens was his former paramour, Materna who testified that Giddens had told her about his intentional efforts to hide assets from Morales. Giddens argued that Materna’s testimony should be disregarded “because she was both a spurned lover and a creditor.” The court was not persuaded and found that Materna’s demeanor and consistent presentation of her story was credible. In contrast the court in its opinion stated that it had never “seen a witness as unbelievable as Christopher Giddens” who “seemed incapable of telling the truth.”
The moral of the story is that Giddens trouble with the debt to his former spouse arose because he didn’t play by the rules. In bankruptcy, perhaps even more than some other areas of the law, rules are important ad strictly enforced. The experienced Jacksonville, Florida bankruptcy attorneys at Adam Law Group know the bankruptcy effect on divorce and will ensure that you play by them so that you can obtain the financial fresh start bankruptcy law is designed to provide.