Divorce and Bankruptcy: Protect Yourself

When you are going through a divorce, you have to think about your financial future.  A bankruptcy lawyer can help you protect your finances and your property.  Even if the divorce decree says that your ex-spouse is supposed to pay the debts, your creditors can still sue you for those debts because this is a community debt state.  The question is how you protect yourself from future garnishments, foreclosures, repossessions, or levies.

The problem is that the divorce decree does not bind your creditors.  The divorce decree binds you and your ex-spouse, but not your creditors.  Depending on your situation, you may need to file bankruptcy or you may need to enforce your ex-spouse’s duty to pay their share of the debts.  These are some of the situations that involve bankruptcy and divorce.

What If Your Ex-Spouse Files Bankruptcy?

You cannot stop someone from filing bankruptcy, but you can still protect yourself.  Your ex-spouse can get a discharge against the banks and credit card companies.  This means that those banks and credit card companies cannot sue your ex-spouse.  Again, this is because your creditors were not part of your divorce.

But what do you do, if your ex-spouse is discharging debts they agreed to pay in the divorce?

The agreement to pay those debts created a domestic support obligation.  One of the hard and fast rules in bankruptcy is that a debtor cannot discharge a domestic support obligation.  In addition, you are not required to file an adversary proceeding to collect on a domestic support obligation.  This means that after the bankruptcy is done, you can initiate a collection against your ex-spouse.

Collecting on a domestic support obligation requires an attorney who is familiar with both state collection law and bankruptcy law.  Additionally, your right to collect on the domestic support obligation does not change, even if you file for bankruptcy.  If your ex-spouse files bankruptcy, you should not give up on collecting that is owed to you.

What You Need To File Bankruptcy

Sometimes you cannot wait to file bankruptcy, you need debt relief now.  For example, you may have so many debts that you know you can never repay them or you may be facing aggressive creditors.  In any event, it is fine to file bankruptcy either before or after your divorce.

If you file bankruptcy before your divorce is complete, there are some things that you need to take into consideration.

The first is that your ex-spouse can enforce the divorce decree against you, regardless of whether you file bankruptcy.  This is why it is a good idea to consider a mutual bankruptcy agreement, rather than an agreement to assume debt.  If you need to file bankruptcy, your ex probably does too.  You should consider a provision that both spouses are considering bankruptcy to resolve debts; and that, neither party is responsible to the other for the payment of any community debt.

The second is that if you file bankruptcy before divorce, anything that you agree to in the divorce decree is a post-petition obligation.  Any debt that you incur after you file bankruptcy is called post-petition and is not covered by the bankruptcy.  This applies to all debts, not just debts from a divorce.

If you are concerned about the debts in your divorce, you should consult a bankruptcy lawyer who can work with your family lawyer to protect your interests and help you start the next phase of your life.

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