Divorce and Bankruptcy – Legal Advice

Divorce and Bankruptcy

Divorce and Bankruptcy. Wow. What a double whammy that is. Splitting up is miserable. And, it’s damned expensive. The financial body blows of divorce will put many people into bankruptcy.

Why are Divorce and Bankruptcy interrelated?

Divorce and BankruptcyThe need for divorce and bankruptcy legal advice will often hit you at the same time. These are both highly charged emotional experiences. Your urge to fight may get in the way of making sound, cost effective legal choices. Bankruptcy often follows on the heals of divorce due to the costs involved in splitting up.

Divorce lawyer fees are expensive. Especially when issues of child custody are involved. In custody cases there may also be fees tacked on for court ordered psychologists. Also, the courts often appoint independent counsel to represent the minors. When all that happens, the parent with the most money may get socked with all those added costs.

Divorce frequently hits couples who are having money problems. Spouses fight over money more than anything else.

Are you planning to divorce? If you aren’t broke already, you probably will be soon. Individuals often run through all their savings on divorce expenses. When their savings are gone, they run up credit cards to pay fees. Another factor is the expense of operating separate households. The family income that used to run just one household often isn’t enough to run two separate households.

Custody of children and pets is not the only thing people fight over. Fights over the division of property may turn brutal, nasty and expensive. Do you own a business? If so, get ready for expensive fees charged by forensic accountants and valuation experts. You and your spouse may fight bitterly over the value of the business.

Most people facing divorce and bankruptcy have some of the same basic questions.

Divorce and BankruptcyDivorce and Bankruptcy: What’s the effect of filing bankruptcy in the middle of divorce?

Answer: Filing bankruptcy will not affect your ability to get divorced. In other words, you retain the ability through the family court to change your status from married to single.  For some, this is important as they want to remarry. Or for other reasons they need to become single sooner rather than later.

With regard to property, the assets in your bankruptcy which are exempt from the bankruptcy estate can be distributed within the divorce.  See more about exempt property. Assets that are not exempt are subject to administration in the bankruptcy. Non exempt assets cannot be distributed without permission of the bankruptcy court. The non exempt assets may be liquidated to pay creditors. Assets of little value may be abandoned by the bankruptcy trustee. Only after the bankruptcy has been fully administered will the remaining non-exempt assets be subject to division in the divorce. For more info, including advice on what property is exempt vs non exempt, you should consult an experienced bankruptcy attorney.

Divorce and Bankruptcy: Will bankruptcy give me relief from my support arrears?

Answer:  Generally no, but it depends on what kind of relief you are seeking.

Divorce and BankruptcyIn a chapter 7 liquidation, you will continue to owe the arrears. Debts for support or that arise from a divorce judgment are nondischargeable in Chapter 7 cases. See more about nondischargeable debts. If you are having your wages garnished for support, the garnishment will continue. While it is possible some collection methods for the arrears will be stayed briefly, the amount owed will not be affected by the bankruptcy. Other forms of bankruptcy that require payments over time, including chapter 13, allow for – and indeed mandate – repayment over time that is often less than the payments ordered in the family court and will result in full repayment of the arrears at the end of the case.

Support arrears may be restructured and paid under Chapter 13. Another benefit of Chapter 13 is that debts arising from a court judgment for the equalization of property may be discharged. See more about the benefits of a Chapter 13 discharge.

Divorce and Bankruptcy: Does the bankruptcy affect my child custody rights?

Answer:  No. The filing of a bankruptcy case will not make you lose your children.

Divorce and Bankruptcy: My lawyer bills like a greedy shark. What do I do if my lawyer billed me for a ton of money that I can’t pay?

Divorce and BankruptcyAnswer:  One of the unfortunate outcomes in a divorce may be a big bill for attorney fees. In this case bankruptcy may be a good option. Fees owed to your own lawyer are usually discharged in the bankruptcy. But suppose you were ordered to pay your ex spouse’s attorney fees? That debt may be considered equivalent to support which is generally not dischargeable.  It is advised that you talk to an experienced bankruptcy lawyer to determine whether bankruptcy will help you erase a legal fee debt.


Written by Christopher D. Cantore, Esq. and Leon Bayer, Esq. Christopher is an experienced family law attorney practicing in Los Angeles California. Christopher can be reached at telephone no. 818-971-9529, and by email at coolesq@gmail.com. Leon is a partner in the Los Angeles bankruptcy law firm of Bayer, Wishman & Leotta, leonbayer@bayerwishman.com. Christopher and Leon recently worked together on a complex case involving divorce and bankruptcy.