Nov 12, · Divorce is a life changing and traumatic for everyone involved. One of the biggest causes of divorce is money problems and arguing and fear of overwhelming debt. Sometimes, couples come to me considering divorce, but when we see that their main problem is debt, a case can be filed, the pressure is reduced, and the divorce is avoided. Dec 23, · Bankruptcy Causes; Read This When Bankruptcy and Divorce Coincide. Modified date: December 23, Share. Facebook. Twitter. Linkedin. ReddIt. Email. Print. In theory, marriage is a blessed sacrament and sacred institution in the majority of cultures. In practice, however, a marriage is by no means an easy thing to maintain. In past decades, bankruptcy and divorce sometimes went hand-in-hand, but for another reason. People would file bankruptcy after divorce in an effort to avoid having to pay their ex a divorce settlement, alimony or other monies awarded by a civil court.
In comparison, chapter 13 bankruptcy sets up a three- to five-year payment plan instead of completely eliminating debt, and can possibly drag your divorce or separation out longer than necessary. If you are involved in a chapter 13 bankruptcy and decide to file for divorce during the repayment period, you can choose to cancel or restructure the bankruptcy plan. By canceling, you agree to stop the agreed upon payment plan; however, all debt you and your spouse have assumed will still be your responsibility.
If you choose to restructure the plan, it divides the plan into two cases — one for you and one for your spouse; you can then handle the bankruptcy separately from your partner. These cases can become complex if not handled properly and can cause a lengthy divorce if anything goes awry. The most common types of nondischargeable debts include:. In addition to the debts that are outright nondischargeable, there are other ways certain debts can be barred from discharge.
If the debtor fails to follow these rules, the court may deny their debt discharge request. The chapter 7 discharge may be denied if the debtor:. There are numerous rules and regulations regarding nondischargeable debts; the best way to determine which debts you can expect to have discharged is to meet with an experienced bankruptcy attorney to review your case.
If you and your spouse hired a divorce attorney together, you may need to begin searching for a new one. If you, or your spouse, decide to file for bankruptcy during your divorce proceedings, your divorce attorney cannot represent both of you. This is due to the fact that attorneys are barred from representing clients that have a conflict of interest with each other. Filing for bankruptcy creates a conflict for the attorney because his or her clients are now opponents in another legal matter.
This can become a burden because of the time and effort it takes for one or both parties to find a new attorney and update them on the case so far.
It also means that you and your spouse will be paying separate legal fees , creating a financial burden as well.
Divorce and bankruptcy are chances for a fresh start for you, your ex, and your families. By knowing these aspects of the two, you can make a more informed decision and come out stronger than ever. However, both of these processes can be extremely detailed and complex, and should not be handled without experienced divorce and bankruptcy lawyers on your side. The type of bankruptcy 7 or 13 affects which debts can be discharged, if and when debts will be discharged, and the contents of the bankruptcy estate.
In relation to divorce, one difference is that property settlements contained in a divorce judgment Marital Settlement Agreement are no longer dischargeable under Chapter 7, but are dischargeable if certain conditions are met under Chapter In fact, child support and maintenance referred to as domestic support obligations in the bankruptcy statute receive priority treatment.
Therefore, under Chapter 7 property is first distributed to fulfill the support obligation, and under Chapter 13 the support obligation must be paid in full during the bankruptcy proceedings. Under the new bankruptcy law, failure to pay current support obligations in full can result in denial of a discharge under Chapter Support obligations, such as child support, are not dischargeable under Chapter 7 or Chapter Obligations assumed in a divorce are not dischargeable under Chapter 7.
Therefore the debtor cannot avoid liability for these debts. These debts, however, may be discharged under Chapter 13 if the debtor complies with the payment plan and has paid all support obligations in full. Therefore, you may become liable for these debts despite the marital settlement agreement and the divorce. These obligations are treated the same as the assumption of debts in a divorce. Under Chapter 7, your former spouse cannot avoid these obligations, but may be able to avoid the obligations under Chapter 13 bankruptcy.
To protect your rights, however, you may need to file a claim in the bankruptcy like other creditors. If I am contemplating filing for both divorce and bankruptcy, should I file one or the other first? How will this affect the divorce proceedings? How long does the automatic stay last?
What are the different types of bankruptcy and what is the relevance to divorce cases? My ex-spouse just filed for bankruptcy. Will this affect his obligation to pay child support and maintenance?
When my ex-husband filed for bankruptcy, he owed a substantial amount of child support.