New Case Law: Bankruptcy and divorce don’t mix well.
On December 5, 2007, the Oregon Court of Appeals in Cam and Cam, _____ Or App _____ (2007) upheld a trial court’s ruling setting aside a divorce judgment, but said the court got the result right but the reasons wrong. The case explores the tension between bankruptcy and divorce law.
Mr. Cam and Ms. Cam were trying to settle their divorce. Mr. Cam thought there was a complete deal, but Ms. Cam did not. Mr. Cam’s lawyer drafted and submitted a judgment, which the court then signed. The judgment awarded Ms. Cam real estate and a money award ( a judgment for money.) Less than a month prior to filing the judgment, Mr. Cam filed for bankruptcy, but did not submit all the necessary paperwork to the bankruptcy court, and his petition was dismissed. Unknown to the divorce court (and probably Mr. Cam’s divorce lawyer), the bankruptcy case was active when the judgment was entered.
Ms. Cam then moved to set aside the judgment, and the court granted her motion on the basis that there was no a complete agreement, and that Mr. Cam had concealed assets.
The Oregon Court of Appeals upheld the trial court’s ruling, but said that the trial court was “right for the wrong reason.” When someone files for bankruptcy, an “automatic stay,” or prohibition on all creditor activity goes into effect. The court upheld the trial court ruling because the entry of the divorce judgment dealing with property violated the “automatic stay,” not because Mr. Cam may have hidden assets or the settlement was not complete. The trial court had the right result, but for the wrong legal reason. The court further ruled that the trial court did not err in setting aside the non-void (or non-stayed) portions of the judgment because of the court’s broad authority under ORS 107.105.
The moral of the story? If you are filing for bankruptcy, TELL YOUR DIVORCE LAWYER! The federal filing trumps most state court legal actions, and you may make your expensive, hard won judgment moot.