how to prevent loss of divorce property settlement in bankruptcy

There are a few things you can do to protect yourself from a former spouse's Chapter 13 bankruptcy:

• Get rid of existing debts of both of you. ...
• Avoid obligations for one spouse to pay the other spouse's debts. ...
• Divide assets equally. ...
• If you can't divide assets equally, give the payment-receiving spouse a lien (property interest) on the property the payment-making spouse received. ...
• Reserve support. ...

Full Answer

What happens when you file Chapter 7 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.

Are divorce-related obligations dischargeable in bankruptcy?

If a divorce-related obligation is determined to be a DSO, the debt will not be dischargeable in either a Chapter 7 or Chapter 13 Bankruptcy.

What to do if your spouse owes you money after divorce?

If your spouse owes you money based on a divorce-related debt, you should contact an attorney that practices in personal bankruptcy to ensure that your rights are protected. Clearly Label and Describe Debts First and foremost is to properly label marital debts and clearly state the intention of the parties or the court.

How does the bankruptcy court determine the nature of support?

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.

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.

Do people file bankruptcy after 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. Your debt will endure regardless of your relationship status.

Can I stop my spouse from filing bankruptcy?

Yes, you can file bankruptcy without your spouse. You'll want to look at several factors to determine whether filing bankruptcy with or without your spouse makes the most sense for you.

What items are not dischargeable in bankruptcy?

Additional Non-Dischargeable DebtsDebts from fraud.Certain debts for luxury goods or services bought 90 days before filing.Certain cash advances taken within 70 days after filing.Debts from willful and malicious acts.Debts from embezzlement, theft, or breach of fiduciary duty.More items...•

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 only one spouse files bankruptcy?

If most debts are owed only by one spouse, it may be appropriate for that spouse to file for bankruptcy alone. However, if one spouse does file for bankruptcy in order to discharge debts, the other spouse may be held responsible for repayment of some debts, such as jointly-owned credit card debt or medical debt.

What happens if spouse files bankruptcy?

If a husband files bankruptcy without his wife, only the husband's debts are discharged. If the debts are held jointly, the non-filing wife will still owe even after one spouse has filed bankruptcy. The bankruptcy filing will appear on the husband's credit report, but should not appear on the wife's.

Can I file bankruptcy and keep my house and car?

In many cases you can file bankruptcy and keep your home and keep your car if you claim bankruptcy. For over half of the people we meet with a bankruptcy is NOT necessary; a consumer proposal is a better solution and even if you do file bankruptcy, we still offer alternatives.

What debt doesn't go away with bankruptcy?

Child support and alimony obligations survive bankruptcy, so you'll continue to owe these debts in full, just as if you had never filed for bankruptcy. And if you use Chapter 13, you'll have to pay these debts in full through your plan.

What do you lose when you file bankruptcy?

Filing Chapter 7 bankruptcy wipes out most types of debt, including credit card debt, medical bills, and personal loans. Your obligation to pay these types of unsecured debt is eliminated when the bankruptcy court grants you a bankruptcy discharge.

How does a bankruptcy affect a divorce?

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. Read on to learn more about how filing for bankruptcy can affect your pending divorce.

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.

What's the difference between Chapter 7 and Chapter 13?

One key difference between Chapter 13 and Chapter 7 bankruptcy is that Chapter 7 allows people to completely eliminate their unsecured debt after a specific period. In contrast, Chapter 13 allows people to reorganize their debts while paying back some portion of what they owe.

What is Chapter 13 in bankruptcy?

A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years.

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 assets can a trustee take?

Other similar types of assets a debtor might receive in the future, which the trustee could take, include an impending inheritance or the settlement from a pending personal injury case, if they stem from an event that happened prior to the bankruptcy petition date.

What is the role of a Chapter 7 trustee?

JS: One of the roles of a Chapter 7 trustee is to determine if you qualify for a Chapter bankruptcy. A second role is to determine if the debtor has any non-exempt assets that can be liquidated for the benefit of creditors.

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.

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 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.

What is a hold harmless debt?

Hold-Harmless Debts. When an order or agreement contains language that orders Spouse A to hold harmless or indemnify the Spouse B for a debt that Spouse A is to pay, the Court is creating a potentially non-dischargeable debt – the indemnification debt from Spouse A to Spouse B.

Why was Giddens' debt not dischargeable?

The court denied some of the grounds but ultimately, agreed that Giddens debt was not dischargeable because it was procured through fraud. More specifically, the court found that at the time Giddens entered into the marital settlement agreement, he had no intention of living up to his obligation to pay and transfer property to Morales.

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.

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.

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.

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.

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 ...

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.

Is domestic support considered alimony?

The question of domestic support is a common one when filing bankruptcy. Domestic support is considered alimony and child support, or any monies related to maintenance of the family. The court will take a look at federal law in order to determine what debts related to divorce are dischargeable. It is a case specific determination. It also is dependent on the intent of the parties as to whether or not the obligation is to be a nature of support. Any information that is outlined in the divorce agreement will be ignored.

Can domestic support be discharged under Chapter 7 bankruptcy?

It is also stated under some sections of the bankruptcy law that some domestic support obligations may not be discharged under a chapter 7 bankruptcy or a chapter 13 bankruptcy. As a matter of fact, most domestic support obligations must be caught up when chapter 13 bankruptcy. PNB Parivar. Payments must be current in order to receive a discharge.

Is domestic support discharged in Chapter 7?

In a chapter 7 bankruptcy, a domestic support obligation will likely not be discharged. Section 5 indicates that a debt is not dischargeable if it is owed to a child, a former spouse or a spouse in the course of a separation or divorce. Chapter 13 bankruptcy is different from chapter 7 bankruptcy. It does not have the same limitations. Section 5 does not apply to chapter 13. Therefore, a property settlement debt maybe discharged like any other debt. The court will look at the following factors to make a determination.

Can you file Bankruptcy on Divorce Settlement?

At the same time, there are exceptions to this. Plus, there are ways to protect a non-filing spouse during bankruptcy proceedings.