Divorce and Bankruptcy

Family law and bankruptcy often seem to go together. Either upon splitting up, the spouses cannot pay the family debts and jointly need bankruptcy relief, or one spouse seeks to use bankruptcy as a weapon against the other spouse, or the other spouse's lawyer.

For those divorcing or divorced, the bankruptcy issues generally fall into three categories:

• Support: discharge, payment and the automatic stay
• Property settlement: what happens to debts between spouses
• Liability to others: who is liable for the debts at divorce

Sometimes, one or both spouses can benefit from a bankruptcy filing:

• dischargeable debts are eliminated, leaving more money for the payment of on going expenses, including support.
• taxes can be paid, without interest, or even discharged where sufficiently old.
• the divorce is simplified by the elimination of much of the family debt

When only one spouse files, the legal worlds of state family law and federal bankruptcy law may collide. The bankruptcy courts are left to sift through the wreckage.

Where there are non exempt assets, a bankruptcy filing by one spouse pulls all the community property into the bankruptcy estate and assures that the available assets are used to pay debts now.

A spouse who has the benefit of an indemnity agreement in a divorce decree (a provision that requires the other spouse to pay certain debts or repay the benefited spouse if the creditor makes that spouse pay the debt) may be able to prevent the discharge of the indemnity agreement under 11 U.S.C. 523(a)(15). There are no other bars to one spouse discharging all liability for non tax/ non support debt.

The State Bar does not certify any lawyer as a specialist or expert. This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.