Posts Tagged ‘attorney fees’

BANKRUPTCY ATTORNEY FEES

Monday, September 10th, 2012

TEMPE AND MESA ARIZONA DIVORCE AND FAMILY LAW LAWYER DISCUSSES ATTORNEY FEES AND BANKRUPTCY ISSUES

Submitted by Attorney Douglas C. Gardner

The “American Rule” regarding attorneys’ fees is that generally each party will pay his or her own attorneys fees and costs. There are, however, certain exceptions whereby the Court can order one party to pay all or some portion of the other party’s attorneys fees and costs.

In Family Law or Divorce cases in Arizona, A.R.S. § 25-324 governs when the Court can order one party to pay any portion of the other party’s fees. The Court must consider the reasonableness of the positions taken by the parties, and also the financial resources of each party. Generally, the greater the disparity in financial resources and the greater the unreasonableness of one party, the more likely the Court will order an award or attorneys fees.

A related issue that has arisen more often over the last few years with the terrible economy is when and whether these attorneys fees can be discharged in bankruptcy. As a general rule, money owed to a spouse or former spouse (such as for property settlement issues) can be discharged in a Chapter 13 Bankruptcy, though spousal support and child support are not dischargeable in any bankruptcy.

Attorneys fees fall in the grey area, and may be discharged in certain cases. The argument is that since the Court considers the financial resources of the parties, that it can be considered to be support in nature. The argument would be very strong if the primary issues litigated are child support and/or spousal support.

The Bankruptcy Code, 11 U.S.C. §523(a)(5) states that a bankruptcy discharge does not discharge support obligations. In re Catlow, 663 F.2d 960, 963 (9th Cir. 1981) recognizes that attorney’s fees awarded under Arizona law in a divorce action may be support obligations). In re Bradshaw, No. BR-05-24647-PHX-CGC, 2007 Bankr. LEXIS 2892 at *4 (D. Ariz. Aug. 24, 2007) provides a similar analysis. In re Jarski, 301 B.R. 342, 347 (D. Ariz. 2003) further discusses the issue. Finally, Magee v. Magee, 206 Ariz. 589, 592, 81 P.3d 1048, 1051 (App. 2004) states that, in Arizona, as a matter of public policy, an award of attorney’s fees is “derived from and justified by the duty of support”.

If you are involved in a divorce case involving attorneys fees, bankruptcy, or other simple or complex issues and want experienced legal representation, please call 800-899-2730 and ask to speak with Douglas C. Gardner, or visit our website at yourarizonadivorcelawyer.com.