Divorce is often more than an emotional struggle. It comes with many challenges, including personal and financial obstacles. When one household must divide into two separate, functioning entities, there can be issues paying bills, spousal support, child support, and other obligations.
If you are considering bankruptcy before or after your divorce, the following provides a brief legal overview of the effect of bankruptcy on final divorce orders. For specific advice, discuss filing for bankruptcy with your Los Angeles divorce attorney before making any decisions. Your attorney may alter their recommendations based upon your plans.
Discharge Bankruptcy Vs. Chapter 13 Bankruptcy
There are several types of bankruptcy. Some are discharge bankruptcies. These permit some debts to be discharged or forgiven. Others, like a Chapter 13 bankruptcy, offer structured payment plans to resolve debts. Chapter 13 repayment plans are typically three to five years.
The type of bankruptcy a person files directly affects obligations set forth in their divorce decree.
Spousal Support and Bankruptcy
Spousal support is not eligible for a discharge or bankruptcy forgiveness. However, help with past-due spousal support and child support is available under Chapter 13 bankruptcy.
Past due spousal support and child support can be divided into payments for the term of the Chapter 13 bankruptcy plan. A Chapter 13 bankruptcy plan does not waive any current or future support obligations.
Chapter 13 bankruptcy can help a delinquent parent or former spouse avoid court sanctions for non-payment of past support.
Joint Unsecured Debts and Bankruptcy
Any joint unsecured debts are included in a bankruptcy case, regardless of their type. In a discharge bankruptcy, most unsecured debts are forgiven. However, a Chapter 13 bankruptcy requires a portion of unsecured creditor debt to be paid to satisfy the debt.
The amount paid to each unsecured creditor is on a case-by-case basis. The remainder is discharged according to the bankruptcy plan.
A bankruptcy does not affect a former spouse’s joint unsecured creditor debt. Unsecured creditors may still pursue a former spouse to collect any outstanding balance due.
While a creditor may release a person from their debt, a family court may not. It is imperative to seek the advice of an attorney to determine any debt liability issues.
Secured Debts and Bankruptcy
People who choose to keep secured property after their bankruptcy must continue making the payments on that property. Secured property generally includes cars, real property, and homes.
If a former spouse is in possession of the real property and there is a property agreement in place that the spouse filing the bankruptcy pay the debt, the court may enforce the order even if the debt is discharged.
Are You Considering Bankruptcy and Divorce?
If you are contemplating bankruptcy and divorce, speak with an experienced family law attorney first. It may be financially beneficial to you and your spouse to file bankruptcy prior to any divorce action.
With the help of your attorney, decide whether to file for bankruptcy before or after your divorce case. Filing bankruptcy during a pending divorce can place your divorce case on hold until any bankruptcy proceedings are finalized.
Contact an Experienced Attorney Today
To learn more about divorce, bankruptcy, and how the two interact, contact the experienced family law attorneys at Fernandez & Karney. We want to answer your questions and help you choose the best course of action for both your present and future well-being.
Your meeting with one of our skilled attorneys is entirely confidential. Not only can we assist you with divorce and bankruptcy, but we can also advise you on other divorce matters like child custody and visitation, and alimony.