sethb[at]panix.com (Seth Breidbart) wrote:
- quote -

Probably. But avoiding a court ordered property settlement,
at least in my experience, has never been grounds to deny a
discharge. While alimony and child support cannot be
discharged, debts due to property settlements can be.

From a legal standpoint the wife did nothing wrong.
Husband's lawyer was the one who was probably at fault, for
not getting security for the debt.

Stu

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Dick Adams <rdadams[at]smart.net)> wrote:

- quote -

But was he a creditor entitled to appear in the bankruptcy
case at all?

Seth

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"D. Stussy" <kd6lvw[at]bde-arc.ampr.org> writes:
- quote -

After looking into this a little further, but not that deep, my
impression is that he should have objected to the discharge in
bankrupty since his ex-wife was trying to avoid a court ordered
property settlement. His objection should have been based on
the issue that the debt and the alimony were interlinked by the
property settlement.

Taking it back to the divorce court and requesting sanctions is
a better alternative.

Can he write it off as a bad debt?

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John wrote:

- quote -

You don't have anything to write off. The separation of
property due to a divorce is a NON-tax event. That's what
you effectively have.

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"John" <jzshepard[at]hotmail.com> wrote

- quote -

If she filed bankruptcy, she doesn't owe it anymore, to you
or anyone else. So forgiving the debt or even sending her a
1099 won't give her any more taxable income than she already
had.

It's very unlikely that courts here in California would
reduce alimony payments to let you recover the money you
paid out. But if your lawyer will guarantee that result (no
charge if no reduction), then you've little or nothing to
lose. If he won't give you a guarantee like that, I'd be
very wary.

Stu

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John wrote:

- quote -

Well, it's not going to be income to her--the debt was
discharged in bankruptcy, and that means that Section 108
comes into play--so no tax on the discharge of indebtedness.

The more interesting question is whether your loss would be
deductible as well. I don't have time to research it, but
in the back of my mind I'm wondering if, especially if we
are still relatively close to the date of the divorce,
Section 1041 might come into play which says there's no tax
effects of transfers incident to a divorce. I would think
you could get around it, but I'd have to research into that
one.

As well, I suppose that, depending on your wife's financial
situation when the agreement was entered into, the IRS might
be able to question whether there was a reasonable
expectation she would pay the debt. Again, I doubt that one
would be an issue (in most divorces there's not that much
cooperation <grin> ), but since I don't have all the facts
I'd merely warn on that one.

That said, I personally would probably go for the reduction
in monthly payments if I could get that. You aren't going
to recover $16,000 from any "tax savings" and, as I noted,
if you are looking at the revenge factor of "make her pay
tax" that isn't going to work either. It appears to me that
paying the $2,500 and then "for sure" recovering the money
over the next nine years is your most economically
beneficial route.

--
Ed Zollars, CPA
Phoenix, Arizona

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"John" <jzshepard[at]hotmail.com> wrote

- quote -

This is much more of a legal question than a tax question.
In retrospect, I should have returned it to the sender with
the suggestion of submitting it to misc.legal.moderated.

But since it is here, my first thought is that this is part
of a property settlement which I am lead to believe Courts
hold as sacred cows, i.e., not subject to post-decree
tinkering unless fraud can be shown.

My second thought is a question: Can you include a divorce
settlement in a bankruptcy? I don't think so. But then I
wouldn't even know where the Law School was if it wasn't
across the street from my office in the Business School.

- quote -

Possibly the Judge will include the attorney's fees in the
write-off. But again how would I know. <g
And then again it all depends on how the property settlement
is writen. It one thing to say she will pay these debts and
another to say she will hold you harmless from these debts
and will indemnify you if she fails to do so.

- quote -

With all due respects, this makes no sense at all unless a
Judge orders it because I do not believe pre-paid future
year alimony is deductible in the year paid. You may just
be creating audit fees for tax representation.

Warning: NEVER go to your own IRS tax audit unless supeonaed
to be there. ALWAYS send a Circular 230 tax preparer who
has audit experience in your place.

Dick

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Divorce decree states that my ex-wife was to pay $16K in
unsecured debts. So she filed bankruptcy and the creditors
came after me. I had them take me to court and get a
judgment. Then I paid them.

This was her debt per the divorce decree. My attorney says
the if we go back to the divorce court, the judge will most
likely reduce my alimony payments and let me recover it over
the 9 years left on the alimony. This will cost me another
$2,500 in legal fees.

My preference is to write it off my taxes for 2003 giving it
to her as income. No legal fees - at least not now.

Advice?

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