Bankruptcy and Divorce
It’s not uncommon for people who are going through a bankruptcy to also have been recently divorced or currently be going through a divorce. There have been many articles written to try to determine the cause of this. Does financial stress cause an economic downturn in the marriage which then leads to the divorce? Does talk of divorce cause any economic downturn which then leads to bankruptcy? Many ex-spouses are concerned with whether child support and alimony will continue to be paid when a bankruptcy is filed. Also, when the debtor files a bankruptcy many wonder if a divorce settlement is enforceable. Once an ex-spouse files bankruptcy, does child support continue to be paid? Does alimony continue to be paid? If the debtor is behind on both the alimony and the child support, is this a dischargeable in a bankruptcy? These are the many questions that our Montgomery bankruptcy lawyers are asked by our clients. At The Sellers Law Firm we make it a point to be very specific with our clients who are either planning on getting divorced and filing a bankruptcy or who are recently divorced or filing a bankruptcy. There are many complicated issues and questions which must be answered before we file a Chapter 7 bankruptcy or Chapter 13 debt consolidation.
When a debtor files for a Chapter 7 bankruptcy or Chapter 13 debt consolidation, an automatic stay is issued. The automatic stay should be considered an injunction which has the effect of protecting all assets of the bankruptcy estate.
An ex-spouse can be considered a creditor. If you file for a bankruptcy before filing for a divorce, the divorce court cannot come in and divide any property which is in that bankruptcy estate. This would include items such as the family home, all vehicles, retirement accounts, or any other property which the debtor may own. This creates a situation where the family court judge cannot divide any property that is owned individually or jointly by the parties; however issues such as alimony temporary or permanent child support can move forward. The divorce attorney or attorneys for the parties can ask the bankruptcy court to give them permission to move forward with the divorce and the division of assets.
If the debtor is in a Chapter 7 case, then this will move along fairly quickly since most people are in and out of the Chapter 7 in 4 to 6 months; however, if the debtor is in a Chapter 13 case the divorce may become greatly complicated since the Chapter 13 will last between 3 to 5 years.
What we have seen is that many of our clients file for a bankruptcy immediately after a divorce is finalized. In all honesty, if it's a Chapter 13 case this makes preparing the bankruptcy petition far easier. If in the divorce decree a former spouse is owed money for child support, alimony, attorney fees or Guardian Ad Litem fees, then these present significant issues which must be addressed by the bankruptcy court. You cannot discharge a Qualified Domestic Relations Order (QDRO). Debts that are considered part of a QDRO are non-dischargeable by law.
We must next look at any unsecured debts that were jointly held together by the ex-spouses. The debtor may be able to discharge any jointly-held debt that the parties had. The debtor will always be able to discharge any individual debt that he had regardless of what the language of the divorce judgment is; however, you should seek an experienced Montgomery bankruptcy attorney to determine your rights. You should also discuss this with your divorce attorney. It is possible that if you discharge a joint debt and your ex-spouse then becomes responsible for that debt, then that ex-spouse may be able to take you back to family court and ask that you be held in contempt of court. Many divorce decrees state that all debts contained within the divorce decree are non-dischargeable. There are no hard-and-fast answers when dealing with a divorce. Back due alimony, back due child support, and any debts owed through a QDRO can be added into a Chapter 13 debt consolidation and paid over a period of three to five years.
To be honest, in the confines of limited available space of a website page, it is impossible for us to answer all the questions that can arise when facing the issues of bankruptcy and divorce. This is why we advise people to come set an appointment and meet with our team of experienced Montgomery bankruptcy attorneys and discuss the complicated issues of bankruptcy and divorce.
At The Sellers Law Firm, we are here to help you. All consultations are free, and we can usually see you within 24 hours. We have offices in Montgomery, Selma, Greenville, and Troy. Call us at 334-LAWYERS (529-9377) and set an appointment to discuss your options. You may also use the “text us” link or Contact Form on our website. Remember that doing nothing changes nothing so act today!