Here are few things you should know:
- If an ex-spouse decides to file bankruptcy after a divorce settlement, their finances will be taken over by the bankruptcy trustee. ...
- If the debtor filing bankruptcy has a home and the ex-spouse is a joint owner, then the trustee will not distribute the non-filing ex-spouse’s half of the property to the creditors in the bankruptcy case. ...
Is it better to file bankruptcy before or after divorce?
One pro of waiting until after your divorce is final before filing for bankruptcy is that only your income can be considered in the means test that the court applies. So if you are divorcing a large income earner and want to file for Chapter 7 as opposed to Chapter 13. Then it might be best to divorce first.
What happens if you file bankruptcy during a divorce?
If you file for divorce during the course of a bankruptcy, the divorce court will not have jurisdiction over any of your assets or liabilities that are part of your bankruptcy estate. The divorce court can get jurisdiction to dissolve the assets and liabilities of your marriage if your bankruptcy stay is lifted.
Can I take out debt before filing bankruptcy?
Purposely running up credit card debt before filing for bankruptcy is a bad idea. The general rule is that you can discharge most credit card debt in bankruptcy. Whether your credit card debt is $1,000 or $100,000, the bankruptcy discharge you receive at the end of a successful bankruptcy case will wipe out your liability on the debt.
Can my ex-spouse file for bankruptcy after our divorce?
Anyone may file bankruptcy after divorce, including your ex-spouse. If you had joint debt with your ex-spouse, then you may be responsible for the debt that you held with them. Creditors do not automatically separate debt upon divorce.
How does bankruptcy affect divorce settlement?
Answer. If you have a pending divorce case, filing for bankruptcy will not affect actions to establish custody or child support. But it will stop the ongoing divorce proceedings related to division of property.
Can I file bankruptcy after my divorce?
Anyone may file bankruptcy after divorce, including your ex-spouse. If you had joint debt with your ex-spouse, then you may be responsible for the debt that you held with them. Creditors do not automatically separate debt upon divorce.
What happens to settlement agreement when file bankruptcy?
Finally, if bankruptcy is filed soon after the settlement agreement is executed (usually within 90 days) any settlement payments may be clawed back (preferential or fraudulent transfer actions). Thus, try to incorporate a new obligor and/or secure the settlement payments with collateral.
Is it better to file bankruptcy before or after divorce?
If your divorce is filled with conflict, it may be best to wait until the divorce is final before you file for bankruptcy. This can allow you to seek a discharge of your debts without having to depend on your spouse working together with you in your bankruptcy case.
Why do people file bankruptcy after divorce?
Divorce is a common reason for filing a bankruptcy case. Many people who have gone through a divorce experience financial problems. They may have difficulty paying bills with a single income or have trouble paying bills because of their domestic support obligations.
What happens if one person on a mortgage files bankruptcy?
What Happens With My Existing Mortgage? With a chapter 13 bankruptcy, you won't lose your property. You'll include details in your repayment plan on how you plan on paying your mortgage. In most cases, an automatic stay is issued once Chapter 13 is filed.
How do you hide money in a bankruptcy?
The following are several ways people attempt to hide assets in bankruptcy proceedings: Lying about owning assets. Transferring assets into another person's name or giving them to someone else to hold. Creating fake liens or mortgages to make the assets appear like they have no value.
What can you not do after filing Chapter 7?
After you file for bankruptcy protection, your creditors can't call you, or try to collect payment from you for medical bills, credit card debts, personal loans, unsecured debts, or other types of debt. Wage garnishments must also stop immediately after filing for personal bankruptcy.
What does settlement mean in bankruptcy?
A settlement is a deal you negotiate with creditors to pay less than the amount owed, usually with a lump-sum payment. OK, so why would creditors want to settle your debts for less than you owe? Because they know you can always file for bankruptcy, which could eliminate their ability to collect anything from you.
Can my ex husband bankruptcy affect me?
In terms of your credit score, an ex's bankruptcy should have little to no effect. Scores are individual even with joint or cosigned debt obligations. The risk to your score could increase if you are held responsible for more debt than originally decided and you struggle to make payments.
Will my bankruptcy affect my ex husband?
If your former spouse had a credit card, contract or loan only is his or her name, filing bankruptcy will ultimately discharge that debt without any collection action aimed at you. The bad news results from debt on a joint credit card, loan or account. A divorce decree does not take priority over a bankruptcy filing.
Can Chapter 13 take my workers comp settlement in NJ?
The simple answer is, if your bankruptcy case is completely over, no – the bankruptcy court cannot take your money to pay back your creditors.
How long do bankruptcies take to settle?
For most filers, a Chapter 7 case will end when you receive your discharge—the order that forgives qualified debt—about four to six months after filing the bankruptcy paperwork. Although most cases close after that, your case might remain open longer if you have property that you can't protect (nonexempt assets).
What happens after bankruptcy discharge?
After discharge, the bankrupt is no longer subject to many of the provisions of the Bankruptcy Act but does still have some ongoing obligations to assist the trustee. Annulment of bankruptcy means that a bankruptcy comes to an end if a certain event occurs.
What happens if a spouse is obligated to pay a divorce debt?
If a spouse is obligated to pay a divorce-related debt, the indemnification language would make it near irrefutable that the non-filing spouse has legal standing to challenge the treatment and classification and dischargeability of a debt included in the filing spouse’s bankruptcy.
How to determine if a divorce debt is dischargeable?
The primary question that needs to be asked when determining whether a divorce-related debt is dischargeable is if the debt is a Domestic Support Obligation (DSO). The Bankruptcy Code defines the domestic support obligation at 11 U.S. Code § 101 (14A). The simple version is any child support, alimony, or any other payment that is “in the nature of alimony, maintenance, or support” will be a DSO. The Bankruptcy Court will look to federal law to make this determination, and will look past any labels that may have been used in the divorce agreement or order. The determination is a case-specific determination of whether the intent of the parties or the divorce court was for the obligation to be the nature of support.
What to consider when drafting a divorce agreement?
Protecting the Non-Filing Spouse in a Chapter 13. There are several items that should be considered when drafting a divorce agreement or judgment and trying to avoid issues and protect the non-filing spouse in case of a Chapter 13 filing.
How to protect a client in a divorce agreement?
Another way to protect a client in a divorce agreement or order is to reserve the issue of alimony for failure to abide by the orders of the court, including payment of the debts.
What is the purpose of filing bankruptcy?
When an individual files a bankruptcy, the most basic reason is to eliminate debts by receiving a discharge. In a Chapter 7, the individual eliminates unsecured debts (such as medical and credit card debt) and keeps property that is exempt. In a Chapter 13, the debtor proposes a plan to pay back certain types of debt over a three to five year period, can catch up delinquent loans on secured property, and can keep non-exempt property. In either a Chapter 7 or 13, the debtor receives an order at the conclusion of a successful case that discharges (eliminates) any remaining debt. However, some debts may be non-dischargeable, and high among the non-dischargeable debts are debts related to divorce.
What is non-dischargeable debt in Chapter 7?
However, some debts may be non-dischargeable, and high among the non-dischargeable debts are debts related to divorce.
Can a DSO be discharged in Chapter 7?
In a Chapter 7, even if a debt is not a DSO it will probably not be dischargeable. Section 523 (a) (15) states that a debt is not dischargeable if it is owed to a spouse, former spouse, or child of the debtor, and it is incurred by the debtor 1) in the course of a divorce or separation, 2) in connection with a separation agreement, divorce decree or other order of a court of record, or 3) because of a determination made in accordance with State or territorial law by a governmental unit. This effectively means that any debt that is a divorce-related debt will be non-dischargeable if you file a Chapter 7 Bankruptcy.
How does bankruptcy affect divorce?
Bankruptcy Can Affect a Divorce Settlement / Advantages, Disadvantages, and Misunderstandings of Bankruptcy. You can use a Chapter 13 plan to catch up on child support arrearage or spousal maintenance support (alimony) arrearage. If you have received a Chapter 7 bankruptcy discharge, you may still be obligated to relinquish to ...
What happens to your tax refund when you file bankruptcy?
JS: Because, when you file bankruptcy, the bankruptcy trustee takes control and possession of all of your assets until they are abandoned or are determined to be exempt. Certain portions of a tax refund may be exempt, but usually it is a non-exempt asset.
What happens when you get discharged from Chapter 7?
So, when people receive their Chapter 7 discharge, they sometimes forget about their non-exempt assets, because they might not have received their tax refund at the time they filed their case, but they have accrued their rights to at least a portion of their tax refund. That portion is what becomes an asset.
How long do you have to file Chapter 13?
CH: Sometimes people must file Chapter 13 case because it has been less than eight (8) years since they filed a previous Chapter 7 case, which renders them ineligible to file another Chapter 7 until it has been more than eight (8) years since the date of filing the previous Chapter 7 case. In other words, if they desperately need debt relief during that eight-year time frame, they must file for relief under Chapter 13 of the U.S. Bankruptcy Code.
Can you file Chapter 13 bankruptcy?
CH: You can file a Chapter 13 anytime, but a debt will not receive a discharge unless the new case is filed more than four (4) years after the filing of the previous Chapter 13 case. Also, some debtors are rendered ineligible for a Chapter 7 case because they earn too much money to qualify for a Chapter 7 case because of something called the Means Test. In other words, the computer program we use determines that a debtor has the ability to pay back a significant portion of their debt; therefore, they are not allowed to discharge certain debts in their entirety under Chapter 7 of the U.S. Bankruptcy Code. As a result, they must file a Chapter 13 case and pay back as much of their debt as they can afford during a five-year plan.
Can a Chapter 13 bankruptcy discharge a property settlement?
Because the obligation to the ex-wife appeared to be a property settlement, and because Chapter 13 of the bankruptcy code allows a debtor to discharge property settlement debts, I urged this particular client to file a Chapter 13 case, rather than a Chapter 7 case, so he could seek the discharge of this property settlement debt to his ex-wife.
Is alimony a nondischargeable debt?
There was absolutely no language in the agreement that indicated it was in the nature of alimony or maintenance. The reason that’s significant is that anything that’s in the nature of alimony or maintenance is a nondischargeable debt, whether you file for a Chapter 7 or Chapter 13 bankruptcy. (Child support is another example of a nondischargeable debt.) In this particular case, the Judge awarded $900 per month to the ex-spouse as a way to equalize the respective value of their respective retirement accounts, because his was worth more than hers.
What happens to the income in Chapter 13 bankruptcy?
In a Chapter 13 bankruptcy case, the court determines how much disposable income the filer has to put toward his or her repayment plan. Filing for divorce and acquiring new financial obligations, like alimony and child support, will reduce the amount of disposable income an individual has available. This can alter his or her repayment plan and even ...
What to do if you are going through Chapter 13?
If you are working through Chapter 13 and considering divorce, or if you are going through a divorce proceeding and are considering filing for bankruptcy, talk to your bankruptcy lawyer about the specific ways you can expect the divorce to affect your bankruptcy.
Can you discharge alimony debt in bankruptcy?
You cannot discharge alimony debt or child support debt through bankruptcy. However, in certain circumstances, you can discharge other personal debts, like credit card debt and debt you owe your former partner for reasons other than alimony or child support, like buying out a share of your family home. Your lawyer can discuss which debts are dischargeable and which are not with you to help you determine whether bankruptcy is the right choice for your debt management.
Can a divorce court divide assets in bankruptcy?
The Divorce Court Cannot Divide Assets in the Bankruptcy Estate. When you file for bankruptcy, your non-exempt assets go into the bankruptcy estate. This is the pool of legal and equitable interests you hold at the time of the bankruptcy. Once property is in the bankruptcy estate, a divorce court cannot divide it between spouses.
Can a former spouse become a creditor?
A Former Spouse Can Become a Creditor. When a divorce settlement leaves one spouse indebted to the other, the spouse who is owed money can become a creditor in the other spouse’s bankruptcy case. This means that the debt the filing spouse owes his or her former partner is covered by the bankruptcy case and the owed spouse’s rights ...
What happens after bankruptcy?
After the sale, any outstanding debt is discharged and you are no longer responsible for paying it. No property is sold in a Chapter 13 bankruptcy. Instead, a repayment plan is put into place based on your income, to be paid over time.#N#Read More: What Happens After Bankruptcy Discharge?
How does a divorce work?
Most states allow couples in a divorce to specify by agreement how marital debt should be divided. If they cannot agree, the court will apportion the debt based on state law. Some states treat debt as community property and divide it equally between spouses, while other states allocate the debt according to what is considered "fair." In considering what is fair, a court will look to several factors, including each spouse's ability to pay.
What is an indemnification clause in a divorce?
In cases where a couple co-signed on a debt, such as a car loan, either the parties or the court may insert an indemnification clause into the divorce decree or settlement agreement. These provisions are meant to protect against a scenario wherein the debt balance is assigned to one spouse who then discharges the debt through bankruptcy, leaving the other spouse potentially liable to the creditor. Thus, an ex-spouse is prevented from later arguing during a Chapter 7 bankruptcy that the debt was not made in connection with a settlement agreement or divorce decree. The indemnification clause creates a new obligation at the time of divorce and is not dischargeable.
Can you discharge debts in Chapter 7 bankruptcy?
Federal law provides specific exceptions to discharge for marital debts. In a Chapter 7 bankruptcy, if the bill was either incurred during a divorce or separation or in connection with a marital settlement agreement, divorce decree or other court order, it is not dischargeable. This covers most bills and includes unsecured debt, such as credit cards, which are normally dischargeable. By contrast, this exception does not apply to Chapter 13 bankruptcy filings, which does allow discharge of unsecured marital debts, even those incurred during the divorce.
Does indemnification protect against discharge of co-signed debt?
This means that the indemnification provision would not protect against discharge of a co-signed debt. In fact, the only recourse a spouse has in this instance is to participate in the case and try to persuade the court that the debt is either a DSO or the repayment plan must include the debt to ensure the total amount to be repaid equals or exceeds that which would be recovered in Chapter 7 liquidation.
3 attorney answers
Whether you can discharge all or part of the $10,000 owed to your ex depends on the what the money is payment of. The previous commentors are correct in that the debt is not dischargeable if it is for alimony, spousal or child support.
Scott Douglas Jordan
That depends on what it is for. If it is for alimony, spousal support, or child support, the short answer is "no". The 2005 amendments to the Bankruptcy Code refer to these as "domestic support obligations", and they are generally not dischargeable under any chapter of the Bankruptcy Code.
Michael W. Gallagher
If it is part of the bankruptcy decree it is not a judgment. If it is a property distribution you may be able to discharge it in a chapter 13 but a chapter 7 will not discharge it. If the order is in the nature of an order of support it could be found to be non-dischargeable.
How long before bankruptcy can you settle a divorce?
If a debtor signs a divorce settlement with a non-filing ex-spouse six months or less before filing bankruptcy, the debt settlement may be reduced by the bankruptcy trustee. However, if the debtor and the non-filing ex-spouse reach a divorce settlement six months or more before the bankruptcy filing, it is unlikely that ...
How does divorce affect bankruptcy?
When you file for bankruptcy, you want to ensure that there is a substantial net gain for you as you will now have the burden of rebuilding your credit. You want to make sure that all of your debts are discharged and the chances of passing those debts to your ex-spouse are minimized . Allmand Law Firm, PLLC offers expert representation in matters of bankruptcy. We can help ensure you get the best result when you file and begin to prepare for your financial future.
Have More Questions About Bankruptcy After Divorce?
If you have any questions regarding bankruptcy after divorce, we are always there to answer your questions. Feel free to call us or contact us today .
What happens when you file for divorce?
When you file for divorce, marital property is rolled into a marital estate and a determination is made as to who gets what property. On the other hand, debts are divided in the same way. You can use this during divorce negotiations to come up with an equitable solution, but the debt is separated in the same way that your marital property is.
What happens if an ex spouse files for bankruptcy?
If an ex-spouse decides to file bankruptcy after a divorce settlement, their finances will be taken over by the bankruptcy trustee. The bankruptcy trustee will be responsible for managing the debtor’s assets and distributing payments to creditors. An ex-spouse with a divorce settlement will be a claimant or creditor in the bankruptcy.
Can you file for bankruptcy with both spouses?
If both spouses file for a joint Chapter 7 bankruptcy, they can discharge all of their marital debt together and then proceed to divorce without having to worry about dividing marital debt. On the other hand, both spouses will now have the bankruptcy on their credit report.
Can a spouse declare bankruptcy?
In this scenario, the only way that the spouse declaring bankruptcy can discharge the debt entirely would be if the other spouse also declared bankruptcy. Further complicating matters, if the one spouse was ordered to pay off the debt as part of a property agreement, the debt cannot be discharged in Chapter 7 at all.
How to file for bankruptcy while divorce is pending?
How to file bankruptcy after a divorce. Collect your documents. Take credit counseling. Complete the bankruptcy forms. Get your filing fee and file your case. Mail documents to your trustee. Take bankruptcy course 2. Attend your 341 meeting.
What to do if divorce is not final?
If your divorce is not yet final, it may make sense to address debt relief and file for bankruptcy before divorcing. There are pros and cons to this, and it’s important to consider all of them carefully. First, as soon as you file a bankruptcy case something called the automatic stay goes into effect. This stops any other court proceeding from continuing until the bankruptcy is complete. The automatic stay does not stop the court from creating or enforcing any support payments. It does, however, include all other aspects of divorce cases and can cause a significant delay in completing that proceeding, so it’s important to consider your priorities.
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What is an indemnification clause in a divorce decree?
This means that one spouse is agreeing to make the other spouse whole if they suffer losses from a joint debt. For example, in a divorce decree, one spouse might agree to take on a joint car loan and indemnify the other spouse from any losses.
How long does it take to get a copy of a divorce decree?
Additionally, even though the divorce decree is not filed with the court, your case trustee will request a copy of it before your 341 meeting, which happens approximately 30 days after the case is filed.
How much does it cost to file for bankruptcy?
Once you’ve completed the paperwork, you’ll need to get together your filing fee. The current filing fee for Chapter 7 is $338 , which is due in full when you file your Chapter 7 bankruptcy case with the court. It’s the same amount for single and married filers. The payment must be paid by cashier’s check or money order, you can’t make this payment using a credit or debit card. If you feel that you can’t afford this fee, you can request a fee waiver, provided you are earning less than 150% of the federal poverty line, considering your combined household income. If the waiver request is not granted (or you do not qualify), you can also request to pay the filing fee in installments .
How many documents are needed to file for bankruptcy?
This can take a little time as there are usually more than 20 documents to complete, including your bankruptcy petition, all of the schedules, the statement of financial affairs (SOFA), and more. After a recent divorce, there are some specific details to note.
