Filing for bankruptcy after divorce proceedings is not uncommon. The stress and financial burdens that accompany divorce may lead people to believe bankruptcy is their only option.
When you learn your ex-spouse has filed for bankruptcy, the best thing to do is educate yourself about the process so you can take steps to protect yourself financially. Divorce proceedings should address who’s responsible for the mortgage or other expenses if one ex-spouse files for bankruptcy.
The problem is divorce proceedings often neglect issues related to bankruptcy. If you’re in this situation, you’ll have to respond proactively to ensure your financial future is safe.
Type of Bankruptcy
Learning whether your ex has filed for chapter 7 or chapter 13 bankruptcy will help you determine what action you need to take. In chapter 7 bankruptcy, assets are sold to pay off creditors. Generally, divorcees are on the top of the list of creditors – meaning you get paid first.
Chapter 13 bankruptcy allows the debtor to create a repayment plan. However, some debts from divorce proceedings are eligible for discharge.
In either type of bankruptcy, you may have to file a proof of claim form with the Bankruptcy Court or possibly risk losing your ability to collect on your claim. There usually is a deadline to file a proof of claim in the bankruptcy notice. You should seek the advice of counsel if your ex files for bankruptcy and you have, or may in the future have, a claim against him or her.
What to Do When Your Ex Files for Bankruptcy
If you’re listed as a creditor you’ll be notified and will receive information about attending a 341 meeting (meeting of creditors), deadlines for filing a claim, and the necessary form.
An automatic stay prevents creditors from attempting to collect payment from a debtor. There are exceptions: an ex-spouse can file (or continue) a lawsuit for support related to divorce proceedings. If you have unpaid support, you may also be able to go through the courts to collect that money.
Child Support and Alimony
Unpaid child support and alimony get top priority in a bankruptcy case – whether it’s chapter 7 or chapter 13. You don’t have to go to bankruptcy court to defend your right to child support or alimony; however, you may have to file a proof of claim to get paid through the bankruptcy.
Chapter 13 and chapter 7 bankruptcy have different laws related to property in divorce settlements. In chapter 13 bankruptcy, debts related to property settlements in divorce proceedings may be dischargeable. You may to file a document with the bankruptcy court to request that the property settlement not be eligible for discharge.
What if the Court Discharges the Debt Owed to Me?
You still have recourse if the bankruptcy court ruling is not in your favor. You can return to divorce court to request more support. You’ll need to document the change of financial situation due to the bankruptcy ruling.
If you end up paying the full mortgage on a co-owned home, it may be worth your while to make sure yours is the only name on your home’s title. Is the mortgage payment a financial burden for you? You may also be able to go through a government program to reduce your monthly mortgage.
If you’re the spouse paying child support and your ex-spouse’s bankruptcy impacts your financial situation, you may return to divorce court to ask for a new settlement that reflects your current situation.
Bankruptcy is always difficult and divorce proceedings only complicate matters. Our experienced bankruptcy attorneys can help you determine what steps to take to protect your interests. Contact us today to review your case!