Divorce During Bankruptcy

What happens if I get a divorce during my Chapter 13 bankruptcy? 

A Chapter 13 bankruptcy repayment plan lasts between 3 and 5 years. During that time, many families have significant changes to their household—one of those could be divorce. If a married couple decides to get a divorce before their Chapter 13 repayment plan is completed, they will have to decide how they would like their case to proceed. This post will discuss common options for married couples that choose to divorce during their case.  

Lifting the Automatic Stay

If you are filing for divorce and there is an active bankruptcy you will need to get the permission of the bankruptcy court for the divorce court to divide your personal property and debts.  This permission is easily obtained and your attorney can file the necessary paperwork to get it done.  If you fail to do this then certain aspects of your divorce might not be valid later.

Divorce, Bankruptcy, and Conflict of Interest

Your attorney might be conflicted out from representing either one of you moving forward.  In some cases your attorney will need to withdraw from representing you and your spouse because the divorce creates a conflict of interest that forces them to withdraw.  A divorce will force most attorneys to leave the case because they cannot represent two people in the same matter when there is a clear conflict of interest.  In some cases if the parties can work things out the attorney can stay on the case and help complete things.

Continue making Chapter 13 payments 

A couple may wish to continue making their scheduled Chapter 13 payments until their case is complete. This option works well for a couple that is close to completing their case and their individual budgets can support the payment. It requires that they are able to get along and communicate with each other to make decisions in the case.  Spouses will determine how much each will contribute to the plan payment and must be able to work together to get payments completed.  

Bifurcate the Chapter 13 case  

Couples also have the option to bifurcate or separate their joint case. Each spouse could proceed with their own Chapter 13 case. This option allows each spouse to continue making payments based on their income and have their individual debts discharged at the end of their cases.  This is usually done when they need to make independent decisions about the case and have new attorneys.

Convert or refile Chapter 7 Bankruptcy 

If spouses are eligible for Chapter 7, they may convert their case and potentially complete bankruptcy in a shorter period. Our attorneys will be able to discuss this option and how it will affect any assets the couple has. Spouses may also choose to dismiss their chapter 13 case, and each refile under Chapter 7 if they now qualify and had not previously qualified for chapter 7 while married.  

Conclusion 

If you need a bankruptcy but might also need a divorce later on you need to be careful about filing the bankruptcy with your spouse.  You could accidentally disqualify your bankruptcy attorney from representing you once the divorce proceedings begin.  Contact your bankruptcy attorney if you and your spouse are planning to separate or divorce and you are already in a bankruptcy case. Our bankruptcy attorneys will be able to advise you on the best way to proceed and how it will affect your case.  

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