How Bankruptcy Affects Divorce

Posted By San Diego Bankruptcy Pros || 30-May-2014

If you and your spouse decide to part ways, keep in mind this could affect the divorce proceedings – particularly the property division aspect. If you are filing for bankruptcy, some of your assets may be liquidated and therefore could not be divided in divorce. Because bankruptcy initiates a process known as "automatic stay," all attempts to collect or move your property will be put on hold while your bankruptcy is pending.

Liquidating Jointly Owned "Marital" Property

Nonexempt property can be liquidated during Chapter 7 bankruptcy to pay off creditors. If this property is jointly owned by you and your spouse, then one of a few things could happen, but what usually happens is that the bankruptcy trustee pays your spouse a portion of what the asset sold for. This amount would be determined by your spouse's interest in that property.

Chapter 13 bankruptcy is different. Rather than liquidating your property to satisfy the creditors, you agree to reorganize your debts into more manageable payments. To arrive at a repayment plan that works, the bankruptcy trustee must determine the total value of your assets/interests, which can be difficult if you own property jointly with a spouse you are in the process of divorcing.

Bankruptcy has no bearing on determining child support and custody. The family judge will simply evaluate each parent's income and expenses, which is the same with or without bankruptcy. Bankruptcy also does not release you from child support obligations. If you were required by a family court to pay child support, bankruptcy does not discharge this debt.

Bankruptcy and family law often overlap. If you are considering divorce, are in the process of divorce, or have already obtained a divorce and you need to file bankruptcy to manage your debt, we encourage you to contact an experienced San Diego bankruptcy lawyer at our firm. Complex cases such as these are best handled by trained legal professionals.

Categories: Bankruptcy

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