In re Ruitenberg

Summarized by Fred Ringel , Leech Tishman Robinson Brog PLLC
11 years 11 months ago

Citation:

In re Ruitenberg, Case No. 13-2175 (3d Cir. March 13, 2014)

Tag(s):

Ruling:

Deciding when an interest in the equitable distribution of marital assets in a divorce proceeding becomes a claim against the bankruptcy estate begins with the Bankruptcy Code's definition of a “claim.” A "claim" is, in relevant part, a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured[.]” 11 U.S.C. § 101(5)(A). Even if no final judgment of divorce existed when the petition was filed, the spouse's interest constituted a “claim” under § 101(5), even through such claim might be unliquidated and contingent on a final decree apportioning marital property. Given the Bankruptcy Code’s expansive definition of a “claim,” the Court held that a non-debtor spouse has an allowable pre-petition claim against the debtor’s bankruptcy estate for equitable distribution of marital property when the parties are in divorce proceedings before the bankruptcy petition is filed. notwithstanding the contingent nature of the right to payment. The Court found that the contingency of a final divorce decree does not change the fact that the right to payment exists and thereby constitutes a ‘claim’ for purposes of § 101(5).

Procedural context:

Appeal from the judgment of the Bankruptcy Court for the District of New Jersey (Hon. Raymond Lyons), certified by the District Court for direct appeal to the Third Circuit Court of Appeals, overruling the objection to the claim of the Debtor's ex-wife asserting that her equitable share of martial property pending her divorce from the Debtor constituted a claim against the Debtor/ex-husband's bankruptcy estate.

Facts:

Debtor filed a chapter 7 petition prior to the entry of a final judgment of divorce from his spouse. The spouse filed a timely proof of claim for the estimated amount of her share of the marital assets.Chapter 7 Trustee sought to expunge the claim on the grounds that her interest in equitably dividing the marital property of her spouse's bankruptcy estate was not a “claim” for purposes of § 101(5) of the Bankruptcy Code, 11 U.S.C. § 101(5), because the New Jersey court had not entered a final divorce decree before the chapter 7 petition was filed.Spouse argued that she had a contingent claim for equitable distribution of marital property, and that such claim was a pre-petition claim against the estate.

Judge(s):

Ambro, Smith and Sandra Day O'Connor (Retired Supreme Court Associates Justice sitting by designation)

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