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Bankruptcy as a Disqualifying Factor for Child Custody?

posted by Bob Lawless

Several sources, including our friends over at Bankruptcy Beat, are reporting that Michael Jackson's mother, who has been awarded temporary custody of her three grandchildren, might have trouble gaining final custody because of a 1999 bankruptcy filing. Washington attorney Beth Kaufman is quoted as saying, "I think it would be a negative factor but not necessarily a disqualifier. It could indicate that she is not capable of sound financial management.”

It is often said that bankruptcy experts and family law experts don't know know as much about the other field as we should. That is certainly true for me, but I was surprised to read that a bankruptcy filing could be a negative factor for a family law court deciding a child custody matter. The Bankruptcy Code prohibits discrimination against former bankrupts, but that prohibition applies only in specific situations such as certain state licensing decisions or in employment matters. It would not prohibit a state court from considering a bankruptcy filing in a child custody matter. Still, on the question of fitness to be a parent, an old bankruptcy filing would seem to have little relevance.

Sure enough, Ms. Kaufman is right--there are cases where a family law court cites a party's inability to engage in sound financial management as a factor in a child custody decision. In some of those cases, the family law court refers to a bankruptcy filing as evidence of the party's financial instability. It seems clear from these cases that it is not the bankruptcy filing that causes the problem, but the general inability to manage one's financial affairs that concerns the courts. A ten-year old bankruptcy filing, standing alone and without more evidence of recent financial problems, would not fit this description.

All of this reminds me of an important point that often can be overlooked when talking about bankruptcy. When thinking about a person's financial well-being, a bankruptcy filing is not the problem. Rather, it is a manifestation of other underlying problems. If you don't fix the underlying problems, a bankruptcy filing is not going to help in the long-run. Applied to the child custody situation, it is not the bankruptcy filing but the underlying financial problems that should concern a family law court. Someone who has used bankruptcy to help put their financial problems behind them should not have to fear the bankruptcy filing will be used against them in a child custody case several years later.

Comments

I wouldn't read much into this. One can of course expect an advocate to throw in every make-weight available, and a commentator to touch every base he or she can think of. In my experience, in the real world as opposed to Neverland, bankruptcy of one or both parties is often an explicit consideration in divorce and family law proceedings, and judges there probably know more about it than they would like. Almost any rationale, good or bad, will turn up in an occasional case. I would hold out for a clear pattern of actual bankruptcy-is-bad decisions before getting worried about this.

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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