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Proceeding with Divorce When in Bankruptcy

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In re Exum; Case No. 08-10079-RGM; February 21st, 2008

Debtor’s spouse filed a Motion for Relief from the Automatic Stay to Proceed with divorce proceedings. Court noted that the automatic stay, does not operate as a stay of the commencement or continuation of a civil action “(ii) for the establishment or modification of an order for domestic support or obligations” or “(iv) for the dissolution of a marriage, except to the extent that such proceeding seeks to determine the division of property of the estate.” Bankruptcy Code §362(b)(2)(A).

The court does have a problem, however, with allowing the equitable distribution hearing to go forward. The court notes that because the Trustee and the creditors are not proper parties before the circuit court in the divorce proceeding and they may be adversely affected by any division of property.

Ms Exum argued, that she will be adversely prejudiced because it is the local rules of the court not to grant a divorce without adjudicating the property rights of the parties. The court answers this by pointing out that is really the circuit courts issue and that, though the bankruptcy court may consider the impact of the automatic stay over other litigation, in this case, the benefit to the creditors of the estate outweighs the detriment to Mrs. Exum.

Mrs. Exum then proffered the argument that there is a benefit to the creditors is the divorce is granted because TxE property would turn into property held by Tenants in Common. The court decided that this required it to analyze the relative benefits and burdens on various classes of creditors, an exercise it was not willing to undertake.

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