Does Bankruptcy Affect a Divorce?

Bankruptcy and divorce are two areas of law that are complicated and specialized. Even if you have a divorce attorney, you may also want another attorney to help you with the bankruptcy. No matter how you decide to proceed, you must ensure that all your rights are protected through the divorce and bankruptcy process.

Sometimes bankruptcy and divorce go hand in hand, and each case can affect the other. All bankruptcy cases are held in federal court, whose decisions bind all state divorce cases. While bankruptcy allows legal protection from your creditors, it doesn’t free you from all your obligations, and does not exempt you from the divorce provisions.

There are many issues about a divorce that are affected by bankruptcy. For example, all divorces determine how property gets divided between spouses, but, when a bankruptcy is filed, all property owned by the filer is frozen. This means that any property owned by the filer cannot be distributed, and the divorce has to be put on hold until the bankruptcy is finalized.

The time when a divorce or bankruptcy is filed can also play a vital role. For example, if you file for bankruptcy after a divorce, you must first pay any child support or alimony before you can start paying back creditors. On the other hand, if you file for divorce while going through a bankruptcy, a divorce court can enter temporary support orders.

The type of bankruptcy you file for can also affect your divorce issues. Most people file for either chapter 7 or chapter 13. A chapter 7 bankruptcy liquidates the filer’s assets and uses the proceeds to pay off debts. On the other hand, a chapter 13 bankruptcy makes arrangements for the filer to pay back the debts over a specific time period. In addition, if you file chapter 7 bankruptcy you can’t get rid of a debt incurred in your divorce if it will negatively affect your spouse more than you. Alternatively, you can discharge divorce debts in a chapter 13 bankruptcy.

Many people believe that filing for bankruptcy means you don’t have to pay your debts and obligations, but this is not true. Even if you file for personal bankruptcy, you still have to pay any and all child support or alimony obligations. However, you can ask the divorce court to reduce your child support or alimony payments because of your bankruptcy.