Can a claim to a portion of a military retirement be discharged in Bankruptcy Court?
If military retirement is property, and if property is dischargeable in bankruptcy court, then a claim to a portion of military retirement should be subject to discharge in bankruptcy court, right?
This issue was recently before the NC Court of Appeals in the matter of Brown v Brown.
In the Brown matter, Husband filed for divorce in June of 2012, and about 6 months later filed for bankruptcy. Husband successfully completed the bankruptcy plan in 2017 by completing payments of $60,000 to his creditors. At this point Husband received a Bankruptcy Discharge.
All the while the parties' equitable distribution claims were pending in the Family Court. (C'mon, NC- 5 years to resolve a divorce!?). Wife never requested relief from the automatic stay to proceed with her equitable apportionment claims in district court. Additionally, she had been properly named as a creditor on the bankruptcy action and received all notices.
After issuance of the Bankruptcy Discharge the divorce case resumed. Husband argued that a North Carolina trial court had no mechanism for the involuntary assignment of a portion of a his military pension to the his former spouse after a bankruptcy discharge of an equitable distribution claim."
The Court of Appeals ruled that Wife had a "proprietary interest" in her Husband's military pension that survived the Bankruptcy Discharge. The court distinguished between the nature of the property subject to equitable apportionment and found that Wife's claim was not a dischargeable debt owed to a creditor, so the Bankruptcy Discharge would have no effect.
Not sure I see much of a difference between "nature" of marital property as this court did; I mean it either is or isn't marital property, no? So the moral of the story is that marital property rights to a military pension are different and the claim is apparently inviolable and rightly so.