Domestic Relations – Equitable Distribution – Military Pension – Bankruptcy Discharge

The plaintiff-husband’s military pension was marital property, and, in any event, a military pension cannot be reached by creditors in bankruptcy. Plaintiff’s bankruptcy discharge did not affect the defendant-wife’s claim for equitable distribution of the military pension.

We affirm the trial court’s equitable distribution order.

After the parties separated and filed this equitable distribution action, plaintiff filed a voluntary bankruptcy petition. Although defendant was properly served with notice of the bankruptcy, she did not respond. After plaintiff received his discharge in bankruptcy, and after defendant learned that plaintiff had retired, defendant scheduled a hearing on her equitable distribution claim to plaintiff’s military pension.

The trial court found that defendant was a co-owner of the pension, not a creditor; the pension could not be reached by a creditor; and marital property rights in a military pension are not dischargeable. The trial court divided the pension according to the calculation stipulated by the parties, but the court found that it lacked jurisdiction to divide other property.

The holdings in Perlow v. Perlow, 128 B.R. 412 (E.D.N.C. 1991), Justice v. Justice, 123 N.C. App. 733, 475 S.E.2d 225 (1996), and Hearndon v. Hearndon, 132 N.C. App. 98, 510 S.E.2d 183 (1999), stand for a general rule that the non-filing spouse’s interests in marital property are cut off by the filing of a bankruptcy petition where the non-filing spouse’s rights had not been fixed pre-petition.

However, Walston v. Walston, 190 B.R. 66 (E.D.N.C. 1995), limited this general rule based on the nature of the property at issue. Specifically, the non-filing spouse has a “proprietary” interest in a military pension that is not a dischargeable claim. Walston is merely persuasive authority. Nevertheless, Walston is instructive and must be taken into account, particularly in view of the fact that it is a decision of a federal court interpreting federal bankruptcy law.

Unlike furniture or other personal possessions, a military pension could not be reached by a creditor in bankruptcy. Therefore, there was no reason to treat Ms. Walston as a creditor whose rights to this property were discharged by bankruptcy, since none of Mr. Walston’s secured creditors could have ever reached this property.

The holding that marital property rights in a pension are not dischargeable in bankruptcy follows a long line of cases which have reached the same conclusion.” In this case, defendant has a proprietary interest in the military pension that survives plaintiff’s bankruptcy discharge. Thus, defendant is entitled to prosecute a claim for distribution of that per se marital property.

Defendant’s remaining general claim for an equitable distribution is, as stated in open court, “gone.” Consistent with both Perlow and Walston, the trial court accurately concluded in its written order that “[n]o other assets or indebtedness remains subject to this court’s jurisdiction.”

Affirmed.

Brown v. Brown (Lawyers Weekly No. 011-069-23, 15 pp.) (Fred Gore, J.)  Appealed from Onslow County District Court (James Moore, J.) Jonathan McGirt for plaintiff; Tammy Brown, pro se. North Carolina Court of Appeals