Beware of the Ex: Estranged wife challenges husband’s bankruptcy, has his discharge dismissed

May 14, 2014 By Charisma L. Miller, Esq. Brooklyn Daily Eagle
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An estranged wife’s challenge to her husband’s Chapter 7 bankruptcy filing led to the dismissal of any discharge of debts he may have been entitled to after Brooklyn’s bankruptcy court found him fraudulent.

Aleksandr Virovlyanskiy submitted a Chapter 7 bankruptcy filing in 2011 seeking to discharge credit card debts and child support arrears. Upon notification of this filing, Juliya Virovlyanskiy reviewed her former husband’s application and noticed Aleksandr failed to include income he received from Russia in 2009 and 2010. Worried that her husband would potentially seek to use a bankruptcy discharge as a means to have his child support obligations reduced, Juliya brought an adversary proceeding to challenge Aleksandr’s filing. 

Child support arrears, or unpaid child support payments, are not dischargeable in bankruptcy and the debtor is required to make those payments despite a discharge of debts. Worried that Juliya may not have standing, chief judge of Brooklyn’s bankruptcy court, Carla Craig, allowed her to plead her case as to why she could be harmed by Aleksandr’s potential debt discharge. 

Juliya explained her fear that her estranged husband would use the discharge “to misrepresent his financial situation in the Family Court.”  Craig allowed the adversary proceeding to move forward. The trial revealed that Aleksandr omitted income from his bankruptcy application evidenced by his ability to make repeated travels out of the country. Aleksandr countered that the omission was due to an error by his attorney—likely due to a translation misunderstanding, his argument continues—and noted that as soon as he was made aware of the error, he sent an amended application to the court.  The amended bankruptcy petition notwithstanding, further questioning of Aleksandr damaged his credibility in the eyes of the bankruptcy court causing Craig to deny Aleksandr’s discharge on the grounds that he “knowingly and fraudulently” made a “false oath.”

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Aleksandr appealed the decision, arguing that Juliya did not have the appropriate standing or right to bring the initial adversary proceeding, and therefore he should be granted a bankruptcy discharge. “Standing refers to the requirement that a plaintiff in federal court suffer [an injury],” and that that injury can be redressed by a ruling in the plaintiff’s favor, Brooklyn federal judge Raymond Dearie explained in his written opinion in the Virovlyanskiy appeal.  Mr. and Mrs. Virovlyanskiy possessed joint debts, including credit cards and a rental apartment. If Aleksandr were granted a bankruptcy discharge, Juliya would be liable for the full amount of the debts. Given the potential of Juliya’s liability for Aleksandr’s debts, Dearie ruled that sufficient standing existed to allow Ms. Virovlyanskiy to bring the initial adversary proceeding.

Looking at whether or not Aleksandr should have granted a discharge, Dearie gave deference to the bankruptcy court’s ruling on the matter, contending that “appellate courts must defer to the credibility determinations of trial courts.”

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