When a spouse contemplating divorce also contemplates bankruptcy, things get more complicated. A bankruptcy can affect a divorce if filed before, during or after the divorce process gets underway.
While the divorce proceedings take place in family court, most bankruptcies occur in federal court. There are both state and federal bankruptcy laws that could impact upon your divorce.
In a divorce proceeding a bankruptcy will affect both spouses. There are a few general rules that apply to a divorce that unfolds within the shadow of a bankruptcy.
First, as a general rule, support obligations are not discharged in the bankruptcy proceeding. Thus, a spousal support or child support payor will still be obligated to make the required support payments regardless of a bankruptcy.
Second, joint debts need to be carefully considered. If the bankruptcy is a join filing, then all the joint debts are disclosed and considered by the bankruptcy trustee and judge. If, on the other hand, only one spouse filed for an individual bankruptcy, the joint debts may be discharged as to one spouse, but will survive as to the other spouse. This will be an issue in the divorce proceeding and it is something to watch out for as the divorce gets underway.
Third, usually, the filing of a bankruptcy, with its automatic stay, tends to place any divorce proceeding in abeyance until the stay is lifted by the federal bankruptcy court. So a bankruptcy filing will significantly delay your divorce case.
Beyond these general rules, there are many specific laws and regulations that apply to bankruptcy on a case-by-case basis. Most couples that are divorcing and filing for bankruptcy have separate bankruptcy attorneys.
If you are considering these life-altering procedures, definitely seek out competent counsel in each area of the law. We can guide you in this critical process.
To get started, consider contacting our law firm to schedule a free consultation to discuss your divorce within the context of a bankruptcy petition.