Bankruptcy and Divorce / by Cassandra Hearn

The dissolution of a marriage is a difficult time not only emotionally, but also financially. Divorce means that two people who have typically shared expenses must now shoulder their own financial problems individually. For most people, this is difficult and unfortunately occasionally impossible. As a result, it is not uncommon for divorce to result in one or both spouses filing for bankruptcy. Bankruptcy is governed by federal law under the United States Bankruptcy Code, whereas divorce is governed by California state law. Despite this division, the two interact in important ways.

Spousal and Child support are frequently some of the largest ongoing financial ties between former spouses. It should come as no surprise that this is a common area of concern for spouses receiving support when the paying spouse files for bankruptcy. The bankruptcy code, however, provides special protection for spousal and child support. Support obligations are not dischargeable at all in bankruptcy. This means that a paying spouse cannot wipe the slate clean of child support or spousal support arrearages. Moreover, filing for bankruptcy does not put a hold on the paying spouse’s obligation to continue paying child support. In the event that a spouse files for Chapter 13 bankruptcy, it may be possible for him or her to make a new payment schedule for any past due support amounts, but only the family court can modify future support payments.

Debts that were jointly acquired during marriage and still have both spouse’s names associated with the debt are not excluded from a bankruptcy proceeding. This means that the spouse declaring bankruptcy can include debts in their bankruptcy that the divorce court told him or her to pay. If your name is still associated with that debt, then the creditor can come against you for the unpaid balance. As it would be if there was no bankruptcy case, a creditor is not bound by the terms of your divorce decree. Creditors are free to pursue whatever legal means are at their disposal to collect on the debt from both parties who are obligated on that debt. If you end up having to pay for the debt that your spouse was ordered to pay, then you can go back to family court and seek relief because you ended up paying your former spouse’s lawful obligation.

If your former spouse is declaring bankruptcy and you have concerns about how it will impact you, contact us today at (619) 800-0384. We can help you protect your financial future.