Does Filing for Bankruptcy Stop Divorce?
The many financial pressures that typically accompany a divorce case can send even the most financially responsible party into a bankruptcy lawyer's office. Child and spousal support, attorney fees and the sudden appearance of a new set of living expenses can stretch a party's finances to the point where bankruptcy seems like the only option. Parties should realize, however, that bankruptcy will not solve everything in a divorce case.
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What Bankruptcy Doesn't Stop
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The automatic stay that goes into effect upon a debtor's filing for bankruptcy protection will not stop an action for absolute divorce, nor will it affect the other party's right to initiate and continue with actions for child custody, child support or spousal support. The automatic stay will put the brakes on actions to collect past due support payments from the debtor's assets that constitute property of the bankruptcy estate, but this relief is only temporary; past due support payments cannot be discharged, and when the stay is lifted, the action will continue.
Equitable Distribution and Community Property
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The automatic stay can prevent the progress of an action for community property or equitable distribution, as these are property-based claims that determine a party's rights in marital property and debt. Actions to enforce existing community property or equitable distribution judgments are likewise stayed. If a party fails to respond to the other side's bankruptcy filing after receiving proper notice, the property division claim can be discharged as would any other nonresponsive creditor's claim. Any discharged claim becomes ineffective against the debtor, with the exception of marital obligations in Chapter 7. The creditors remain free to pursue collection from any co-debtor, including a former spouse.
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Contempt Hearings
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When a party fails to abide by a court's order, he can be held in contempt of court. The contempt powers of the court include ordering attorney fees, dismissal of a party's claims and, in some cases, incarceration. A bankruptcy filing can pause contempt actions for failure to abide by equitable distribution or community property judgments, but it cannot protect the debtor from contempt of support or child custody orders. The automatic stay will only be relevant to the extent the other party is trying to collect past due amounts or attorney fees from property of the bankruptcy estate.
Other Effects of Bankruptcy
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The automatic stay is only one consequence of bankruptcy, and it is a temporary one. Other effects of bankruptcy on a divorce case reach even further. A party's receipt of a bankruptcy discharge can provide the other side with a basis for re-opening existing orders on property division and support and re-litigating cases. Furthermore, as a co-debtor spouse remains liable on joint debts, this liability can make her more of a dependent spouse in an alimony analysis by increasing her need. On the discharged debtor's side, bankruptcy can increase a supporting spouse's ability to pay alimony.
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References
- Photo Credit Bankrupt. Businessman with empty pockets (with clipping paths) . image by Vitaliy Pakhnyushchyy from Fotolia.com
