How Does a Chapter 13 Bankruptcy Affect a Pending Divorce?
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Hiring a Divorce Attorney in Bankruptcy
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If you file for divorce while you are in a pending personal Chapter 13 bankruptcy, it can affect your divorce proceeding in several ways. Your first obstacle is hiring a divorce attorney. While in a Chapter 13 bankruptcy plan, you will be making payments to a trustee for a period of three to five years. During that time, the trustee has control over your estate. If you want to hire a nonbankruptcy attorney, you will need permission from your Chapter 13 trustee. The trustee will review your new attorney's fees and the reason you are hiring the attorney. Before you can sign any agreement with your divorce attorney, you will need trustee permission.
Joint Spouse Debtors
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If you and your soon-to-be former spouse are joint debtors in a Chapter 13 bankruptcy, your bankruptcy plan will need to be modified. Because the original bankruptcy was set up considering both spouses' income and assets as well as a joint household, your Chapter 13 plan will usually have to be modified to account for the loss of income and separate households. One spouse can either sever themselves from the bankruptcy or the bankruptcy case can be split into two cases with the spouse's becoming single debtors on their own bankruptcy case. Either way, plan payments to the trustee will have to be modified and the estate's assets will need to be reviewed again.
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Bankruptcy and Child or Spousal Support
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If your pending divorce calls for spousal or child support, those claims are considered priority unsecured debt. Unsecured debt is debt not secured by any collateral, such as credit cards. Even though support payments are unsecured debt, they are priority debt, meaning those claims will be paid in priority over other unsecured claims. Priority debts are paid in full through the bankruptcy plan if possible. The Chapter 13 bankruptcy plan will need to be modified to include these new expenses. This change could extend the length of your chapter 13 bankruptcy plan or even make your Chapter 13 bankruptcy plan infeasible. If your plan becomes infeasible, you have the option of converting to a Chapter 7 estate liquidation bankruptcy. Consult an attorney for further options.
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