Pre-nup won’t necessarily help you in Chapter 13 bankruptcy

Can having a valid pre-nuptual agreement help you out if you later decide to file Chapter 13 bankruptcy?

Maybe, but don’t count on it, at least in Massachusetts.

There, one debtor pointed out that her pre-nup called for each spouse to pay their own debts during the marriage, and in particular, called for the wife to pay the mortgage on their house, which was in her name alone.

No problem so far, but when she had to file for Chapter 13 bankruptcy, her lawyer argued that the pre-nup agreement essentially prevented the husband from being responsible for any of the routine household expenses.

If that was true, the wife would be responsible for all of them, drastically reducing her “disposable income,” which is the amount she then has to pay to her creditors through her plan.

Not surprisingly, this drew an objection from the Chapter 13 trustee. Forced to decide the issue, Massachusetts bankruptcy judge Melvin Hoffman found that even though the pre-nup language may have been legally correct and valid, the wife’s bankruptcy plan was not proposed in good faith, and he refused to confirm it.

The case is In re Waetcher, and it was decided in October, 2010.

If you are thinking about bankruptcy as an option, make sure you get a lawyer who will get your plan confirmed with the bankruptcy court. If you live near the Lawrence, Mass., area, give me a call at (978) 975 – 2608.

 

By Doug Beaton

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