Divorce and Bankruptcy - Dennis B. Dahlberg

Divorce and bankruptcy are both areas that can be emotionally charged subjects for a person who is experiencing either one individually.  Conflicts often arise when a person is simultaneously going through a divorce and bankruptcy, and a myriad of issues can arise with the combination of both as one must concurrently navigate both state and federal law.

Typically, there are three areas of conflict that arise with the simultaneously filing of a divorce during a bankruptcy: (1) the automatic stay, (2) dischargeability of spousal support, child support, and other obligations, and (3) the division of property.  Most of the obligations that arise from a divorce judgment or separation agreement are non-dischargeable in bankruptcy.

An automatic stay in a divorce matter will occur with a case when a bankruptcy is filed as the federal bankruptcy case will take precedent over the state divorce matter.  However, there are a few exceptions which are not stayed upon the filing of a bankruptcy case for example, the establishment of paternity, establishment or modification for a domestic support order, orders concerning child custody or visitation, cases regarding domestic violence, the withholding of income for a support obligation under a current court order, and a few others.

Typically, conflicts will arise when there is a disagreement over a division of property, or if a Chapter 7 trustee attempts to recover property which is also a part of a property division dispute in the current divorce matter.  In these types of cases, the non-debtor spouse will typically file a motion in the bankruptcy case for relief from the automatic stay, to allow the domestic relations court to determine the appropriate division of property.

There are certain obligations that arise from a divorce case that are non-dischargeable in a bankruptcy.  Spousal support / alimony, child support, or other forms of domestic support obligations are not dischargeable under 11 U.S.C. 523(a)(5). 

Additionally, property settlements, were changed by the bankruptcy amendments of 2005 to now make most property settlements in divorce matters non-dischargeable as well in a bankruptcy.

Whether or not to first file a bankruptcy or a divorce depends on the particular facts of each individual case.  It is important to engage legal counsel to discuss your options as to what makes the most sense in a particular case matter.  Many times, as well, such filings will depend upon whether or not the spouses are capable of reasonably and effectively cooperating through the filing of a bankruptcy or a divorce.

To get the facts and find out if bankruptcy and a divorce could work for you, please contact our office for a free consultation with one of our attorneys.

- Dennis B. Dahlberg, Esq.