How Bankruptcy Affects Divorce and Vice Versa

How Bankruptcy Affects Divorce and Vice Versa

Two life-changing events: bankruptcy and divorce. How do these two affect each other? Unfortunately, there are several misconceptions regarding bankruptcy and its effect on divorce and vice versa. There are specific parts of the divorce process that can be affected most by bankruptcy:

  • Child support and alimony payments post-bankruptcy
  • Property division agreement enforceability post-bankruptcy
  • Joint credit card payments if one spouse files for divorce

The divorce process can already be complex. When bankruptcy comes in to play, either during or after divorce, it can make matters even more difficult to navigate. At Family Law Advocacy Group, our Rancho Cucamonga divorce lawyers understand how bankruptcy affects divorce and how divorce affects bankruptcy. We want to make this situation simple, if possible, and give potential clients an idea of what to expect.

Bankruptcy and Support / Alimony

In some divorce cases, one spouse may be ordered to pay the other child support or spousal support (alimony), or both. Sometimes, the individual paying the support (obligor) may feel as though they can look to bankruptcy to help relieve these payments. These types of support are considered as super priority and are made non-dischargeable. No matter the case, even under an automatic stay, these cannot be eliminated and will still continue to be garnished from wages.

Bankruptcy During Divorce

In the event one spouse files for bankruptcy while the divorce is ongoing, the court will continue with the divorce, but they may issue a stay relief on certain matters. This includes the property division process because bankruptcy can affect how the court proceeds with dividing home, pensions, stocks, and more. The family court would need permission from the bankruptcy court before proceeding with the property division phase.

Joint Credit Cards

Often, when spouses apply for a credit card, they include both names on the application. This means if they are approved for the credit card, both parties are liable for the payments. If one spouse files for bankruptcy at any point, the credit card company could go after the other spouse for the payments. Should the couple then divorce, the credit card company may still pursue to collect the debts from the spouse who did not file for bankruptcy.

Protection Against Bankruptcy by One Spouse

The thought of just one spouse filing for bankruptcy and it affecting the other spouse in the event of a divorce is never enjoyable. You may be able to add specific clauses into a prenuptial agreement or postnuptial agreement that limits the impact of a bankruptcy on one spouse should the other file. These clauses can protect the non-filing spouse from certain obligations during the property division process.

Bankruptcy and divorce can be complex. These are both matters that can have big impacts on each other, but it’s important to make sure you know what options you have. If your spouse — or ex-spouse — is filing bankruptcy to alter the property division process, you have rights to protect yourself. Most often, spouses file for bankruptcy in hopes of avoiding alimony, child support, or dividing certain debts. Our attorney is an experienced in family law matters and can help you navigate this type of situation.

We offer free consultations so you can discuss the details of your case with a skilled, knowledgeable, and experienced divorce lawyer. If you believe you need the assistance of an attorney, we encourage you to call our firm as soon as possible to retain representation. Our firm is here protect your rights and your best interests at all times.