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Are Family Court Counsel Fee Awards Dischargeable in Bankruptcy?

Many people familiar with family law will be familiar with the case of Bisbing v. Bisbing, 230 N.J. 309 (2017) in which case the Supreme Court of the State of New Jersey established the current standards that govern requests to relocate out of the State of New Jersey with children. But what happens after a higher court issues a decision?

After the Supreme Court of New Jersey decided Bisbing and established the new best interests standard for all relocation matters, a plenary hearing occurred. The mother was denied the right to relocate out of state with the children. An ancillary issue that had to be decided at that time was the allocation of counsel fees. In that matter, the mother was ordered to pay counsel fees in the amount of $425,000.00 to the father. She had not paid those fees, although she did not file an appeal, and twice filed for bankruptcy, seeking to discharge the fees.

The father opposed having the fees discharged in bankruptcy and motions ensued. The judge determined that the fees were not dischargeable in bankruptcy, not once but twice. An appeal ensued, and the Appellate Division, in an unreported decision, addressed this very issue. According to the bankruptcy code, counsel fee awards will not be dischargeable in bankruptcy if they are in the nature and substance of a domestic support obligations. The considerations by a court, in assessing if the counsel fee award is of the nature of a support obligation and therefore, non-dischargeable in bankruptcy are: (a) if the debt is owed to a spouse, former spouse or child of the debtor; (b) if the debt is actually in the nature of alimony, maintenance, or support; and (c) the debt must have been incurred in connection with a separation agreement, divorce decree or other order of the Court. A consideration will be whether the counsel fee were meant to compensate for a litigant’s “Improper” litigation tactics. Another consideration is if the monies expended on counsel fees could have otherwise been used for the benefit of the children and their financial needs. As such, after assessing these factors the Appellate Division upheld the trial court’s determination that the $425,000.00 counsel fee award was non-dischargeable in bankruptcy. The counsel fee order was in the nature of support since it involved the issue of the father seeking to ensure his custodial rights and parenting time with the children, and the funds he expended could have otherwise been used to support the children. As such, the mother will continue to be responsible for the $425,000.00 counsel fee award.

Payment of counsel fees and litigation costs is a significant issue in all litigation, and family court matters are no exception. Seiden Family Law can help you address these important financial issues.


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