The Appellate Division of New Jersey recently issued a decision ruling that an attorney’s fees award arising from a custody case is not dischargeable in a bankruptcy proceeding—meaning that the debtor still owes the debt despite declaring bankruptcy. The case arose from a New Jersey custody dispute after a divorce. The mother and father divorced in 2014 when their twins were seven years old. The mother, who lived in New Jersey, wanted to relocate with her children to Utah. A family court judge held a hearing and found that, under New Jersey standards, relocation was not in the best interests of the children. The judge also awarded the father $425,000 in attorneys’ fees. The father later moved to enforce the attorneys’ fees award and the court later ruled the attorneys’ fees award was non-dischargeable under section 5 and under section 15. The mother appealed.
Bankruptcy generally allows a debtor to rehabilitate themselves by discharging their debts. However, there are certain debts that are non-dischargeable and remain as debts of the debtor. Here, the judge found the debt was non-dischargeable under 11 U.S.C. § 523(a)(15) (section 15) as a debt “to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.” The judge also found the debt non-dischargeable under 11 U.S.C. § 523(a)(5) (Section 5), as a debt “for a domestic support obligation, finding the attorneys’ fees award was a debt for a domestic support obligation because it is “of the nature and substance of a domestic support obligation.”
The appeals court upheld the judge’s decision. Specifically, concerning Section 5, the court found that attorneys’ fees awards in matrimonial actions were “domestic support obligations” and were therefore non-dischargeable under Section 5. Considering relevant New Jersey case law, the appeals court found that it was non-dischargeable under Section 5 because it was a domestic support obligation and was “in the nature of support.” The court reasoned that the award arose out of a custody dispute concerning the father’s ability to see his daughters regularly and the funds could have been used to provide financial support to his daughters.