Expert: Terry Leeders - 6/18/2007

Question
QUESTION: At the time of my divorce 5 years ago in 2002, my ex was ordered to transfer 1/2 the 401k. Despite numerous court orders, he never transferred it. Interest was also ordered to be paid. In 2005 he filed for bankruptcy.

Earlier this year he contacted me because there were some satisfactions that needed my signature, and he wanted to buy property. I said that I would sign them if he finalized the QDRO. His lawyer stated that the QDRO never existed and then she stated it was 'discharged' during the bankruptcy, and they threatened to take me back to court and make me sign the satisfactions.  After 4 months and much arguing - I told her the QDRO was my asset not a debt owed to me - she 'found' the QDRO and my ex transferred the original amount.

Since my ex kept my part of the 401k for the past 5 years, he also earned the interest on it. I saw in his bankruptcy papers that the 401k amount had significantly increased.  I asked him for it. His lawyer said that 'the bankruptcy discharged the interest on the QDRO monies'.

If bankruptcy can't discharge a 401k, how can it discharge the interest on a 401k?

Further, his lawyer said that my former lawyer discharged the interest. I'm not sure how this is possible for my former lawyer to speak for me, since he stopped being my lawyer 5 years ago. I believe my ex's lawyer is referring to the legal fees owed to my former lawyer by my ex.

The only reason I am pursuing this is because it is the only monetary amount my children and I have received from my ex. If his lawyer is telling the truth, fine, but I just dont want to be jerked around!

Any insight would be appreciated. Thanks.

ANSWER: There is not enough information here to get you a complete answer.  First off, a 401k is an asset, not a debt, so there is nothing 'discharged' for a 401(k)  no interest is discharged either, it is an asset.  The law changed significantly for bankruptcy in October 2005, whereby all divorce obligations are not dischargeable under the bankruptcy.  Under some situations, cash/property obligations may be dischargable under the old law, if the creditor received notice of the bankruptcy.  If it was tied to Child support though in any way, it would have been non-dischargable.  Hope that gives you a little information.  Did you get notice of the bankruptcy?  The time to object would have been on the notice.  You should discuss it with your divorce lawyer to determine what obligations still remain, if any.  Best of luck.


---------- FOLLOW-UP ----------

QUESTION: Terry-

Thank you for the quick answer. The bankruptcy was right around that time, I will have to go back and look at the exact date. Unfortunately, I did not object to anything because he had led us to believe that the 401k was gone.  And because we had since moved across the US, it wasnt worth it to try to take him back to court, again.

When he requested that I sign the satisfactions I requested a copy of his bankruptcy filing and it was there that I saw he claimed all of the 401k as his own.

I appreciate your help with this. I needed verification that the 401k and interest are assets that can't be discharged.

Thank you so much.

Answer
His obligation to pay you a portion of the 401k is a debt, but his 401k is an asset to him.  You should speak to your divorce attorney to determine if they can still get you your share of the 401k.  It would depend on the timing, and how the QDRO was set up.  Only then can you know if the debt was discharged or not.  Thanks