Bankruptcy and Divorce

There are a number of bankruptcy issues.  Marital debt can be a great burden. Some of the bankruptcy issues are,should you file a joint bankruptcy before filing your divorce? What if you are in a Chapter 13 bankruptcy when the divorce is filed? What if you spouse filed bankruptcy after you are divorced? What if you file bankruptcy after divorce? Can you discharge alimony or child support? These are all issues that come up everyday in divorce cases. Sometimes, these issues are clear cut and it is business as usual. Other times a divorce can really muddy the waters. So I will give you an overview of a number of divorce issues that I have come across in my years of practicing both divorce law and bankruptcy law. 

When should you file a chapter 7?  If you have a lot of joint debt and you are thinking about a divorce and you are not ready to pull the trigger on divorce it is usually better to file a joint chapter 7 bankruptcy before the case is filed. Sometimes parties have already filed a divorce and they realize they have a bunch of debt and it is joint debt a judge will sometimes put things on hold to allow the parties to file a chapter 7 bankruptcy to clear away the debt. 

Commonly, a couple is in a Chapter 13 bankruptcy when the divorce is filed. This is usually addressed in the judgement of divorce. Sometimes it is status quo. Meaning if the chapter 13 payment is coming out of one or both parties paycheck that will continue after the divorce is final. Remember, before you can enter a judgement of divorce the bankruptcy court must enter an order approving the judgement of divorce. Sometimes, one party can sever from the chapter 13 bankruptcy and convert to a chapter 7. Sometimes the parties might want to convert the whole chapter 13 to a chapter 7 bankruptcy. 

Bankruptcy after divorce can sometimes be tricky. In the old days if you were order to pay things like your spouses credit cards or attorney fee you could file a chapter 7 bankruptcy and discharge it. But, in the bankruptcy reform act of 2005 the language changed and said that in a chapter 7 bankruptcy you could not discharge " domestic support obligations." Before that it was common knowledge you couldn't discharge child support or alimony in bankruptcy. But this new language made it almost impossible to discharge property settlement in a chapter 7. However; you can still discharge property in a chapter 13 bankruptcy. You can pay child support and alimony arrears in a chapter 13. You can also pay back taxes in a chapter 13.

These are the basics of the kind of issues where bankruptcy and divorce law cross over. if you have questions you can download my book on bankruptcy law on my bankruptcy website www.chapter7lawyermichigan.com or you can call me on my cell at 248-992-0838 or email me at dddern@aol.com