The Bankruptcy-Probate Interface
Here is his introduction:
“When worlds collide.” “Clash of the Titans.” “Irresistible force meets immoveable object.” Pick your metaphor; they are all apt descriptions of the violent interaction between the federal bankruptcy law and state laws governing domestic relations, divorce, and now, even decedents’ estates. And why is this so?
Academically, one clear reason is that while the creation and adjudication of bankruptcy law is exclusively committed to the federal arena by the Constitution, 1 domestic relations law is left to the states under sound principles of federalism. This inevitably leads to friction as these two masses of law and courts intersect at various junctures, sometimes even sharply colliding.
Yet another reason (and here we risk psychologizing) is that both domains of legal proceedings suffer from an inordinate level of stress for all parties. Individual debtors are never there by choice, and the newly revised Code only exacerbates existing pressures. Creditors want to get paid; need we say more?
Cases of divorce, child support, and the division of an estate are certainly not quiescent. The first two characteristically feature emotions running high, if not amok. The last situation’s tension level often increases in proportion to the amount of money being fought over. By any measure, there is more spilling of bad blood then cordiality.
When these two already volatile bodies of law clash, the results can be catastrophic. And that is why we are here to address this controversial and fascinating topic. This year’s Article deals with the subject as follows. First, we shall examine the relevant statutory changes brought about by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”), probably the most sweeping change since the post-Marathon 1984 amendments to the Bankruptcy Code. While small in number, they are significant, so we will parse what they change and what they leave unaltered.
We will then segue into the more interesting cases in the field, and some practical application (mainly of pre-BAPCPA law, of course) of the Code in important areas such as the automatic stay and the discharge or nondischargeability of debts arising from domestic relations proceedings.
We have saved the best for last. The Article’s final topic shall be a detailed discussion of the well known case now before the United States Supreme Court on the scope of the probate exception to federal court jurisdiction. This topic is worthy of our detailed review, and we shall not hesitate to even prognosticate as to the Supreme Court’s final decision.
All this being said, let us proceed, for this is a battle worth watching.