How Does Bankruptcy Affect a Divorce Proceeding?

Some Marital Debts are Not Dischargeable in Bankruptcy

Bankruptcy and divorce are often times contemplated by individuals at the same time. One of the most prevalent reasons that couples seek a divorce is due to financial difficulties that cause strain on the marriage. Therefore, it is not uncommon that bankruptcies and divorces occur simultaneously.

Pursuant to the United States Bankruptcy Code, any and all support obligations are not dischargeable. This means that they are a type of debt that cannot be removed during a bankruptcy proceeding. A spouse involved in the divorce process is often concerned that they will not receive child support or alimony as a result of one of the spouses filing for bankruptcy. It should be remembered that the Bankruptcy Code considers any type of family support obligation to be non-dischargeable in nature. The Code provides that property settlements are also non-dischargeable.

In the event an individual is considering filing for bankruptcy and divorce at the same time, one must be made aware of the fact that the Bankruptcy Court has what is called an automatic stay. An automatic stay prevents any and all non-related litigation from continuing during the bankruptcy process. However, the automatic stay is not applicable to the enforcement of family support proceedings. Additionally, the Bankruptcy Code also has provisions relative to the equitable distribution of marital assets.

Filing Bankruptcy Jointly May be Ideal for Divorcing Spouses

When one spouse is contemplating a bankruptcy filing, it makes sense for both spouses to file for bankruptcy so that they can get rid of all of their debts together. Often, couples who experience financial difficulties and are contemplating divorce elect to file for bankruptcy protection prior to the divorce being finalized. The rationalization behind such a decision is that credit card, medical bills and other debts can be discharged and, at the conclusion of the divorce, neither party will have to be responsible for paying back these debts.

Divorce CakeIt must be remembered that, in the event one spouse elects not to file for bankruptcy, the credit card company can sue that spouse to collect the entirety of the balances owed on the credit cards or medical bills. A joint bankruptcy filing could wipe out that potential liability. Both concepts of bankruptcy and divorce are somewhat complicated. A bankruptcy filing coupled with a divorce proceeding have impacts on one another, so it is advised that you speak with an attorney who is familiar with both if you are pursuing either, or both.

Seek a Law Firm Experienced in Both Divorce & Bankruptcy

If in fact you are contemplating a divorce in New Jersey and are also thinking about filing for bankruptcy, it is strongly recommended that you contact the law firm of Villani & DeLuca. Our firm is capable of handling both bankruptcy and New Jersey divorces so that you can get quality legal advice regarding both areas of law from one source. The attorneys at Villani & DeLuca offer free consultations for both divorce clients and bankruptcy clients. Please call us today at (732) 965-3390 to arrange for your free initial consultation.