 Because
so many people going through divorce are under financial stress,
they often think about the possibility of bankruptcy as a way to
get control of everything. If you're thinking about bankruptcy,
or more importantly, if your spouse is thinking about it, you're
smart to pay attention to this information, because the way you
word your divorce settlement can have a lot to do with how the bankruptcy
affects your divorce, and vice versa.
We strongly recommend visiting www.mydivorcedocuments.com
if you are considering a divorce. You can obtain all the forms you
will need online for your state.
The first and perhaps most important consequence of a person's
filing for bankruptcy is the automatic stay. When you or your spouse
files for bankruptcy, the automatic stay kicks in to stop all efforts
to enforce the collection of debt. It is the exceptions to the automatic
stay that are important in divorce.
Obligations from a divorce to pay support are not dischargeable
in bankruptcy. This includes payments to support a former
spouse or minor children. The support obligations that are non-dischargeable
include child support, alimony or spousal support, and lawyer's
fees from a divorce or to modify support.
A person (in bankruptcy terms, the "debtor") can file
bankruptcy and can complete the bankruptcy process even while owing
support. It's just that when the case is finished, the debtor will
owe the support obligation with no change.
If an obligation from divorce is in the nature of property settlement,
whether it gets discharged is a good bit less certain. They're presumed
to be non-dischargeable, but the debtor may be able to overcome
the presumption and have them discharged. Overcoming the presumption
requires a showing that the debtor cannot pay the debt and still
take care of himself, his dependents, and his business, or that
discharging the debt would result in a benefit to the debtor that
outweighs the harm that would be caused to the former spouse or
child by non-payment.
If your spouse owes obligations to you after divorce, and if there
appears to be a good chance the spouse will file bankruptcy.What
you need to do is to characterize as much of the obligation as possible
in ways that makes it clear that it's intended for support, not
property settlement. Note that the bankruptcy court will not be
bound by what you call the obligation, but if you clearly call it
support and it behaves like support, there's a good likelihood the
court will find it to be support and will not allow discharge. If
there's no question that a portion of the obligation due to you
is property settlement, though, no amount of verbal window-dressing
will change it.
What you want to do is take a lien on one or more assets of value
- preferably assets that are important to your spouse. Then if your
spouse proposes later in bankruptcy to have the debt discharged,
you can seize the property to pay the debt. It's messy, and you
may get far less from the property than it's worth, but depending
on how much equity the debtor has, the leverage of the lien should
help to get the debtor's attention in bankruptcy.
One last thing: if both of you are thinking about bankruptcy, you
may want to file before you get your divorce. That way, you'll know
when you divorce which obligations will be discharged, and you can
each negotiate with full knowledge.
In addition, filing before divorce will save you some money, because
you'll pay for only one bankruptcy filing instead of two, and your
divorce will be a good bit less complicated.
Download the forms today. No Waiting! Get the ball rolling and
starting your new life.
Download the forms today. No Waiting! Get
the ball rolling and starting your new life.
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