A recent unpublished decision, Strunck v. Figueroa, serves as a not-so-gentle reminder that sometimes an enforcement application can be “too little, too late,” and that it is imperative to be proactive to protect your rights under a divorce decree or agreement, especially when your adversary acts in bad faith. In Strunck, a 2011 divorce decree awarded the plaintiff $23,369, which was to be transferred from the defendant’s retirement account. Before the plaintiff could act to collect the $23,369, however, the defendant withdrew the money from the retirement account. In fact, the funds were withdrawn by the defendant before the divorce decree was entered, and the defendant did not disclose this.
Any family law attorneys out there may be thinking that this is an “easy” enforcement motion given there was a clear violation of the decree and an obvious bad faith attempt to shortchange the plaintiff his $23,369. And that may have been true but for what happened next.
The defendant in Strunck didn’t just keep the money and go on her merry way. About four months after the entry of the divorce decree, she filed for bankruptcy and, significantly, listed the plaintiff as a creditor with a claim of $23,269 incurred as a result of the August 2011 divorce decree. The plaintiff was appropriately notified of the bankruptcy petition and the inclusion of the $23,369 as an unsecured claim in that petition. He sought the counsel of a bankruptcy attorney, and claimed that the bankruptcy attorney told him not to pursue legal action against the defendant. If the plaintiff is to be believed in this regard, then, incredibly, the bankruptcy attorney failed to advise him that the Federal Rules of Bankruptcy Procedure, Rule 4004(b), allow a creditor to contest the dischargeability of a debt by filing “a complaint . . . objecting to the debtor’s discharge . . . no later than 60 days after the first date set for the meeting of creditors under section 341(a)” or as extended by the Court. In other words, the plaintiff had the opportunity to contest the discharge of the debt the defendant owed him in the amount of $23,369, but did nothing to prevent the discharge of the debt. As a result of his failure to contest it, the debt was discharged by the Bankruptcy Court.
Despite doing nothing to contest the bankruptcy petition in December 2011, the plaintiff filed a complaint against the defendant in the Law Division in July 2013. By this time, over a year had passed after the debt was discharged. The complaint was dismissed. Not finding any relief in the Law Division, the plaintiff then filed a motion to enforce the divorce decree in the Family Division. Apparently ignoring the fact that the debt had already been discharged, the plaintiff argued that the debt COULDN’T be discharged. He argued that the defendant made a false statement on her bankruptcy petition when she alleged that she was not “holding the property of another.” The plaintiff contended that, actually, she was holding his property, or the $23,369 that should have been his under the divorce decree…even though the debt to him no longer existed…because it had been discharged…because of his failure to contest the bankruptcy petition. The plaintiff’s application was denied (actually, it was denied twice; not accepting the Court’s decision, the plaintiff re-filed his application a second time and the Family Court denied it a second time).
As the Appellate Division succinctly put it: “Plaintiff’s argument rests upon the flawed premise that he could utterly ignore the bankruptcy proceeding and pursue the funds awarded to him in the divorce decree through enforcement proceedings in the family court.” The Appellate Division reasoned that the plaintiff ignored his recourse to do anything about the bankruptcy proceeding, and he can’t now enforce a debt that was discharged. It was simply too little, too late.
In this case, try as the plaintiff might, he could not win given his failure to preserve the debt. Had the plaintiff contested the bankruptcy petition when he was notified of it, he may not only have been able to get the $23,369 he was owed, but perhaps could have obtained sanctions against the defendant for her bad faith theft of the money. The lesson here is that it is important to proactively preserve your rights under a divorce decree or agreement; it is not enough to later say that you were owed money or that something should have been done pursuant to the agreement, when you ignored your earlier recourse to preserve your rights.