In most cases, financial difficulties go hand in hand with family law issues. When you don’t have enough money, you are likely to experience challenges in your marriage. You might also have problems with child support if you don’t have adequate income. After divorce, most couples often find it hard to survive on one source of income. If you’re used to surviving on two sources of income, it’s often hard to adjust and survive on one income source after divorce. If you’re going through a financial crisis and would like to regain control of your finances, a bankruptcy attorney can assist. San Diego Bankruptcy Attorney can help you handle your financial and bankruptcy issues.
Bankruptcy and Divorce
Often, bankruptcy and divorce go hand-in-hand. After divorce, most people realize that income from one household can't sustain two homes. You might feel like everything is falling apart if you are filing for divorce, and the other spouse is filing for bankruptcy. However, with the assistance of a bankruptcy attorney, you can overcome this hurdle and have some time to heal emotionally and financially.
In the face of divorce and bankruptcy, each spouse's ideal situation is to get an equal share of debt and assets. It would not be fair to have one spouse shoulder all the debts acquired jointly. Most courts in California recommend mediation, which involves a meeting of spouses and their attorneys to negotiate.
If you’re contemplating divorce and bankruptcy, it’s important to note that your decisions will have implications on the process. For instance, the timing of filing for bankruptcy will affect the outcome of a divorce. Filing of bankruptcy will have an impact on the division of property and debts during the divorce process.
California is a community property state. This means that every spouse is responsible for the debts accumulated during the marriage. Spouses are liable for debts accrued during the marriage regardless of the spouse who accumulated the debt. Therefore, even after divorce, each party will continue being responsible for the debt obligations.
Even if there is allocation of debts to spouses after divorce, this agreement does not relieve either of the spouses from the debt liability. Creditors are not aware of the agreement made during a divorce. Therefore, if a spouse does not pay his or her allocated debt after a divorce, creditors might still come after the other party.
A couple might have acquired a joint credit card while married. During a divorce, the court allocates the credit card debt to one spouse. In the creditor's eyes, both spouses are liable for the credit card debt because the creditor is not aware of the agreement made during a divorce. Therefore, if the spouse in charge of paying the credit card debt fails to pay, the creditor will go after both the spouses.
Filing for Bankruptcy Before Divorce
A couple might choose to file for bankruptcy before filing for divorce. In this case, many of the debts accumulated while married will be discharged or eliminated. Therefore, the couple will have more certainty regarding their debt obligations. After discharging some of the debts during bankruptcy, a couple will have fewer debts to divide during the divorce process. There will be fewer debts for which the couple will be jointly liable after divorce.
By choosing to file for bankruptcy before filing for divorce, a couple will not have to fight over debt allocation during the divorce proceedings. Therefore, filing for bankruptcy before a divorce could make the divorce process more efficient and amicable.
However, every situation is unique, and you should not always assume that filing for bankruptcy before divorce is the best option. Therefore, if you are considering bankruptcy and divorce, seeking the counsel of an attorney is essential. The attorney you choose should be experienced in both bankruptcy and family law. An attorney will examine your unique situation and recommend the best move depending on your situation.
Filing for Bankruptcy and Divorce at the Same Time
If you file for bankruptcy at the same time with your divorce, both proceedings will overlap. There’s a reason why most people choose to file for bankruptcy before filing for divorce. When you file for bankruptcy under chapter 7 or chapter 13, the court puts an automatic stay. With an automatic stay, creditors can’t contact you or freeze your property and assets. The bankruptcy court sorts all your assets and debts throughout the bankruptcy process.
What happens when you file for bankruptcy and then file for divorce immediately? The divorce process is all about the allocation of property between spouses, among other complex tasks. The automatic stay might make it hard to divide property during divorce proceedings. The family court might be unable to access and share the assets because they will be on hold during an automatic stay.
Therefore, filing for bankruptcy and divorce at the same time would drag out the divorce process. The longer the divorce process, the more stressful it might be for you and your loved ones. Therefore, when considering divorce and bankruptcy, you should be aware of all the implications.
The choice you make regarding filing for divorce and bankruptcy will depend on your situation. For some couples, it’s ideal to file for bankruptcy before filing for divorce. You could consider several factors if you are wondering whether to file for divorce or bankruptcy.
It would be best to file for bankruptcy before filing for divorce if you and your spouse are in good or amicable terms. By filing for bankruptcy before a divorce, you can share the costs of acquiring a bankruptcy attorney. You could also share the filing feels and avoid paying joint debts. If you and your spouse own property together, it would be beneficial to file for bankruptcy before filing for divorce.
Certain jurisdictions allow double exemptions of assets if spouses file for bankruptcy together. However, it’s advisable to contact an attorney to determine if a double exemption is available for you. You will have an easy time dividing assets during divorce when you choose to file for bankruptcy first. Usually, assets are divided during the bankruptcy process, and nothing much will change during the divorce process.
In some instances, your joint income might be above the threshold of filing for Chapter 7 bankruptcy. If your individual incomes are within the threshold of filing for Chapter 7 bankruptcy, you may choose to file for bankruptcy after divorce.
Chapter 7 and Chapter 13 Bankruptcy
While filing for bankruptcy, you can choose between chapter 7 and chapter 13 bankruptcy. The leading benefit for chapter 7 bankruptcy is the short completion process. After filing for chapter 7 months, six months are enough to dispose of all your dischargeable debts. Therefore, you can still file for divorce soon, even if you choose to file for bankruptcy first.
On the other hand, chapter 13, bankruptcy is more time-consuming. Chapter 13, bankruptcy requires a three to five years payment plan. Therefore, filing for chapter 13 bankruptcy before filing for divorce might delay the divorce process longer than necessary.
If you have filed for chapter 13 bankruptcy, you can choose to restructure or cancel the bankruptcy plan and file for divorce first. Even after canceling and stopping the agreed-upon payment plan under chapter 13 bankruptcy, you and your spouse will bear the debt responsibility. Choosing to restructure the debt repayment plan under chapter 13 bankruptcy divides the plan into two. You will bear one repayment plan while your spouse bears the other repayment plan. Dividing the bankruptcy plan will allow you to handle the bankruptcy independently from your spouse.
Handling bankruptcy and divorce procedures can be intricate. If the procedures are not handled properly, they might lengthen the divorce process than necessary. Therefore, you should consult your bankruptcy attorney first. An attorney will assess your situation and recommend the best course of action for your case.
Debt Inclusion in Bankruptcy
When you choose to file for chapter 7 bankruptcy, most of your debts will be eliminated. However, it’s important to note that you can’t eliminate or discharge certain debts. Non-dischargeable debts can’t be forgiven even when you file for bankruptcy. Therefore, you will still have to pay the debts even after filing for bankruptcy. The most common types of non-dischargeable debts are:
- Child support
- Students loans
- Fines payable to government entities and agencies
- Attorney fees especially for child custody and other support cases
- Court penalties and fines
In addition to non-dischargeable debts, the court could prevent some debts from being discharged even after filing for Chapter 7 bankruptcy. It’s important to understand that discharge of debts in bankruptcy is a privilege and not a right. Therefore, under certain circumstances, the court might deny you this privilege.
The court might prevent you from discharging some debts under chapter 7 bankruptcy if you fail to abide by certain rules:
- Failing to avail your tax documents as required
- Hiding some of your property to defraud or trick your creditors
- Destroying your financial records and books
- Committing perjury regarding your bankruptcy case
- Violation of a court order
- Failing to complete a compulsory credit counseling court
Many rules surround the discharge of debts after filing for bankruptcy. You might not be able to understand some of the rules. It’s important to seek a bankruptcy attorney's counsel to review your case and advise you on the debts you can discharge.
Effects of Bankruptcy on Child Support
Filing for bankruptcy allows you to clean your financial slate. You can discharge most of your debts by filing for bankruptcy and hold creditors at bay while you organize your finances. However, child support debt is excluded from the bankruptcy process. The court does not allow parents to use the bankruptcy process to withdraw support from their children. However, bankruptcy can help you with your child support obligations.
Even after you file for bankruptcy, you should continue honoring your child support payments. If you abandon child support payments after filing for bankruptcy under chapter 7, you could be sued for a California law collection. If you have filed for chapter 13 bankruptcy and you miss on child support payments, the court might allow creditors to collect from your assets.
After filing for Chapter 7 bankruptcy, the trustee liquidates your bankruptcy estate. After liquidating your non-exempt property, the trustee uses the proceeds to pay your credits. Different debts are accorded varying priorities in bankruptcy law. Spousal support and child support are repaid before other kinds of debts. Therefore, the proceeds of chapter 7 bankruptcy will pay outstanding child support before paying your other unsecured debts.
After the liquidation of your non-exempt properties and payment of unsecured debts, the court might forgive you from paying other unsecured debts. However, even if the court wipes away all your other debts, it can’t discharge child or spousal support in bankruptcy. If the trustee liquidates your property and pays part of your child support debt, you will still have to pay the outstanding child support balance alongside any other child support payment you might have missed. Failing to make child support payments after filing for chapter 7 bankruptcy could lead to the garnishment of your property's wages and seizing.
When you file for chapter 13 bankruptcy, the automatic stay will provide you with a little more protection from collection actions for child support debts. The creditors can’t sue to collect from your wages because the wages will be part of your bankruptcy estate.
Even if filing for bankruptcy can’t relieve you from making child support payments, it can make the process much easier. Bankruptcy will relieve you from the burden of other debts and help you free some cash you can use to make child support payments.
Wife’s Attorney Fees
In most cases, divorce is a war of attrition. In some instances, the family court might order a husband to pay for the wife's attorney fees. This could take a toll on a person's finances, especially if the attorney fees are high. Can filing for bankruptcy help you to wipe out your wife’s attorney fees?
It’s common for ex-husbands to file for bankruptcy after finalizing the divorce. In the bankruptcy papers, ex-husbands list their wives’ attorney fees as debts in their bankruptcy schedules. List of attorney fees as a dischargeable debt has stirred intense debate. The big question is whether a wife’s attorney fees are a property settlement claim or a support obligation.
The California bankruptcy court recently declared the obligations to pay attorney fees and spousal support as non-dischargeable debts while pursuing bankruptcy. If an ex-husband tries to discharge attorney fees in bankruptcy, a wife can file an adversary proceeding. Filing an adversary proceeding with the bankruptcy court leads to a court hearing to help resolve the dispute. The court might order for a restructure of the attorney fees’ repayment terms.
Stopping a Spouse from Filing for Bankruptcy
It’s important to note that you can’t stop your spouse from filing for bankruptcy. Your spouse has a right to file for bankruptcy under federal law. It’s also important to note that you can’t use bankruptcy as a way of seeking revenge against your spouse.
If you are on a mortgage, the person who spends the most time with the children gets the house or lives in the house until the house is sold. Both spouses have a right to stay in the house if they have a joint mortgage, and they don’t have children.
If your ex-spouse files for chapter 13 bankruptcy, you may have to continue making mortgage payments if you used to contribute before. However, if you never used to make mortgage payments before the filing for Chapter 13 bankruptcy, you don’t have to start making contributions.
Seeking Legal Representation
While filing for divorce, you and your spouse might have hired a divorce attorney together. However, if you or your spouse decides to file for bankruptcy, you have to find an alternative attorney. According to the law, attorneys are barred from representing clients if the clients have conflicting interests. If one spouse files bankruptcy, it creates a conflict of interest because the spouses will be opposing each other.
Having to find an alternative attorney means that you and your spouse will have to pay separate legal fees. It also takes immense time and effort for one or both parties to find an attorney. Understanding how bankruptcy and family law intertwines will help you to make the right move. It’s advisable to contact a lawyer early enough to guide through the process and help you get the outcome you deserve.
Bankruptcy is intertwined with family law. Most people feel overwhelmed while dealing with both bankruptcy and family law issues. Child custody battles, spousal support, divorce, and other family issues are hard to deal with. The situation is worse if you also have to deal with bankruptcy. However, with the help of a bankruptcy attorney, the burden is easier. An attorney will guide you through the intricate legal issues until you put both the family law battles and bankruptcy behind you.
Find a San Diego Bankruptcy Attorney Near Me
Are you going through a divorce or other family law case and also filing for bankruptcy? The legal process can be overwhelming and time-consuming. However, with a competent attorney by your side, the battle is much easier. We at San Diego Bankruptcy Attorney can help to fight for your rights. Contact us at 619-488-6168 and speak to one of our attorneys today.