Chapter 25 - § 25.12 • DRAFTING AND OTHER TIPS — ANTICIPATING A FUTURE BANKRUPTCY

• Jurisdiction: Colorado

§ 25.12 • DRAFTING AND OTHER TIPS — ANTICIPATING A FUTURE BANKRUPTCY

If it is possibly support, label it support. In In re Sampson, 997 F.2d 717 (10th Cir. 1993), the Tenth Circuit stated that a court looks to the underlying document to determine the intent of the parties. Drafting that clearly designates certain obligations as property and certain obligations as support is indicative of intent. See also Marriage of Weis, 232 P.3d 789.²¹ Likewise, a provision that the obligation may change when the parties' circumstances change is indicative of support. The court will also look at the relative financial circumstances at the time of the dissolution to determine whether an obligation was necessary for support.

If it is possible to refinance liabilities so that each party is ordered to pay only those debts in his or her name, this should be done. This is especially important on larger obligations such as car loans. Similarly, counsel should promptly transfer title to assets awarded in the dissolution. If the debtor spouse still has title to property at the time the bankruptcy is filed, the non-filing spouse will be facing a dispute with the trustee over ownership.

If the settlement agreement is going to award money to the client, payable in the future, counsel should secure the obligation with adequate collateral and properly perfect the security agreement. For example, counsel should ask for a deed of trust on real property or a lien on a vehicle. (Note: a deed of trust may provide for a waiver of the homestead exemption; a judgment lien cannot.)

If the real property assets are not titled in joint tenancy with right of survivorship, counsel should file a lis pendens immediately upon filing the dissolution in every county in which the other spouse owns property. Counsel should then release the lis pendens upon completion of the dissolution and/or satisfaction of the marital claim.

Consider language that defines "changed circumstances," for the purpose of seeking modification of support, as including a bankruptcy discharge by the financially advantaged party. Then, if a party successfully thwarts the intended balance of property/debt allocation through bankruptcy, grounds are established for returning to the divorce court for modifications. If appropriate, cite In re Marriage of Caufman, 829 P.2d 501 (Colo. App. 1992), as the basis for retaining jurisdiction to award or modify spousal support if either spouse files...