Tuesday, April 23, 2013

What happens when one of the parties in a Divorce (Dissolution of Marriage) files for Bankruptcy in the middle of the divorce case?

By Jessica M. Cotter, Esq.

There are many reasons people file for a Divorce. In my ten years experience the most common reason is that people are having financial issues and the current economy has made this even more apparent. It has lead more people to make very difficult decision to file Bankruptcy.

When there is a divorce case before the family court and only one party files for bankruptcy the family court has no choice but to stop all proceedings because bankruptcy is in federal court.  The Bankruptcy law states that once a bankruptcy is filed all legal proceedings in any court are stopped until the further order of the bankruptcy judge, this is called an automatic stay. The bankruptcy is not done until the court enters a discharged, which means that most or all of the unsecured debts of the party who files the Bankruptcy are wiped out and they start again with a clean slate.

If there are issues regarding legal decision making (custody), parenting time, child support and spousal maintenance you can ask the bankruptcy court to lift the automatic stay, which the court does usually grant. This gives the power back to the divorce court to handle just these issues. The court also cannot divide any of the debts or assets of the parties until the discharge is entered.  The discharge of community debt by one party may force the other party to file bankruptcy to as well, in order to protect them from the creditors from the marriage.

If this happens to you please contact an experienced Family Law attorney and a Bankruptcy attorney in your area.  Some attorneys and law firms handle both types of matter.

The Law Firm of Jessica M. Cotter, P.L.L.C.
18301 North 79th Avenue, Suite F-186
Glendale, Arizona, 85308

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