Appellate Division Determines Counsel Fee Award is not Dischargeable in Bankruptcy

An issue that often arises in family law practice is whether a party can avoid having to pay a counsel fee award to the other party by filing for bankruptcy and attempting to discharge the debt. In Bisbing v. Bisbing, III, a recently published (precedential) decision, however, the Appellate Division concluded attorney’s fees awarded in family law matters can be deemed non-dischargeable in a future bankruptcy proceeding.

The Bisbing Background

Not surprisingly, the matter was brought before the Court after the Plaintiff filed for bankruptcy and requested that counsel fees previously awarded against her be deemed dischargeable. The lower court rendered a decision denying her application and concluded the counsel fees were non-dischargeable.

As many family law practitioners know, the parties to this case were embroiled in a years-long relocation dispute whereby the Supreme Court of New Jersey eventually issued a landmark decision overturning prior precedent on that issue and establishing a new relocation standard upon which parents seeking to relocate now rely. Eventually, the trial court denied the Plaintiff’s request to relocate with the children out of New Jersey and awarded Defendant counsel fees incurred in connection with the matter in the amount of $425,000. The Appellate Court affirmed the trial court’s decision.

Plaintiff’s Subsequent Bankruptcy Filings

In 2019, Plaintiff filed two Chapter 13 bankruptcy petitions, each of which were dismissed in March of 2020. Meanwhile, Defendant filed a motion to enforce the court’s Order awarding him counsel fees. Shortly thereafter, Plaintiff argued that – based on her prior bankruptcy filings - she was not obligated to pay the counsel fee award because the debt was discharged. The trial court denied Plaintiff’s request and granted Defendant’s application enforcing the fee award. In so doing, it opined as to the nature of fee awards in family disputes and how such fee awards may be “in the nature of support” as provided by the Code.

The Appeal

Plaintiff appealed the trial court’s decision and argued the trial court’s decision was an improper advisory opinion. In affirming the trial court, the Appellate Division agreed that the funds Defendant expended in the plenary hearing in 2017 could have been used for the children’s direct benefit by paying for tuition, child support, and other needs. As a result, the Appellate Court found the fee award was non-dischargeable and was rendered with the purpose of providing the parties’ children with necessary support.

Ultimately, this latest Bisbing opinion sets another precedent and an expectation that counsel fee awards cannot be discharged to release one’s obligation in a family matter. Thus, for litigant’s obligated to pay a counsel fee award to another party, beware that attempting to evade the obligation is not as simple as just filing for bankruptcy.

Should you have any questions or concerns on this or any other topic of family law, please contact Ziegler & Resnick LLC for further assistance.

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