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Bankruptcy and Divorce

This blog is meant to give some insight into basic alimony law in Nevada which has been derived from Nevada Supreme Court cases decided over the past 60 years. One topic, which is of particular importance, is the effect a bankruptcy filing may have on a prior alimony award. In divorce, community debts are divided between husband and wife pursuant to an agreement or after the conclusion of an evidentiary hearing. In either event, when one party is ordered to be responsible for some of the marital debt, they are ordered to do so in lieu of some other financial obligation. For instance, it would be inequitable to allow a party to not pay spousal support but to assume a majority of the community debt only to have to later file a bankruptcy discharging their community debt. This is especially true considering that creditors will now be going after the spouse who didn't file bankruptcy.

To address that, the courts can find that a spouse who files bankruptcy, thereby discharging their community debt obligation, will now be responsible for that same amount by way of alimony. For instance, if the husband was ordered to be responsible for $50,000 of the community debt but filed bankruptcy before paying any of it, Nevada courts could order him to now pay his ex-wife $50,000 in alimony. To hold otherwise would give the husband a windfall and be unfair to the wife who would thus be on the hook for $50,000. To err on the side of caution, practitioners will include an indemnification provision in any decree, according to Martin v. Martin, 108 Nev. 384, which effectively stands for this proposition. Furthermore, in Siragusa v. Siragusa, 108 Nev. 987 the Supreme Court held that discharge of a property settlement obligation in bankruptcy may be taken into account in determining whether the parties' circumstances have changed sufficiently to justify a modification of alimony.

In short, bankruptcy does not necessarily discharge a spouse's obligation to pay alimony.