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How Bankruptcy Affects the Process of Getting a Divorce

Posted by Crissy Del Percio | Jan 01, 2020 | 0 Comments

bankruptcy effects on divorce process

Bankruptcy and divorce are an integral but often overlooked component of divorce law, so understanding its implications in divorce proceedings is of great significance for both parties involved. Bankruptcy can have profoundly adverse effects on the division of assets and financial responsibilities, potentially altering how these are allocated during settlement negotiations.

Bankruptcy may be an option for couples experiencing financial strain, although its effects can have lasting ramifications for divorce proceedings and beyond. Learn how bankruptcy affects divorce proceedings and what individuals must keep in mind when navigating such an intricate landscape.

  1. Automatic Stay of Divorce Proceedings
    Automatic Stay is one of the immediate results of bankruptcy, effectively stopping most collection actions including divorce proceedings. Although this stay provides temporary respite for those filing cases against creditors or their spouse, it also puts off divorce proceedings until the bankruptcy has been settled or the stay lifted.
  2. Asset Division and Bankruptcy
    Divorce settlements place great emphasis on the equitable division of assets, and bankruptcy can have an enormous influence on this process. Under Chapter 7 bankruptcies, assets may be liquidated to pay creditors, thus altering how assets are divided in a divorce settlement. Furthermore, divorcing couples should understand their debt repayment hierarchy since secured debts will typically be paid back first.
  3. Spousal Support and Child Support
    Bankruptcy proceedings can also have an impact on spousal and child support payments and determination. Child support obligations usually take precedence over spousal (alimony), which typically is non-dischargeable in bankruptcy proceedings. Furthermore, court decisions made during bankruptcy proceedings could alter financial obligations stipulated in divorce settlement agreements; hence the importance of coordination between these legal processes.
  4. Joint Debts and Bankruptcy
    Most married couples share joint debts such as credit cards, mortgages, and car loans. Filing bankruptcy may ease some obligations but doesn't relieve those not filing bankruptcy of responsibility for all joint debts; this may have negative repercussions when it comes time for divorce proceedings and settlement discussions.
  5. Chapter 13 Bankruptcy Repayment Plans
    Contrary to Chapter 7, Chapter 13 bankruptcy involves repayment plans rather than liquidation. As part of court approval of any repayment plan, courts will consider whether the debtor is capable of meeting financial obligations included within their divorce settlement when making their decision on any repayment plans approved by creditors. Both processes must work in unison to satisfy all parties involved. It is best practice for attorneys representing both processes involved to work collaboratively for optimal results.
  6. Communication and Coordination
    Given the intricate nature of divorce and bankruptcy law, it is vitally important for attorneys to effectively communicate and coordinate among themselves to avoid conflicts while representing clients' best interests.

Divorce proceedings and bankruptcy have complex relationships; their effects depend on factors like timing, type, and complexities surrounding debt and asset distribution that vary based on each couple. When facing financial challenges and contemplating divorce, it is wise to consult an experienced lawyer with knowledge in both areas. Understanding both aspects can help individuals successfully negotiate this complex legal terrain more easily while working toward reaching solutions that suit both personal and financial objectives.

To learn more or to hire a highly competent divorce lawyer in Kansas City, contact Drama Free Divorce at (816) 615-5555. Our legal professionals assure you that with your sincere cooperation, you and your spouse will have an amicable separation not only for yourselves but also for the well-being of your children. 

About the Author

Crissy Del Percio

Crissy Del Percio is a graduate of the University of Missouri-Kansas City School of Law. Additionally, she received her undergraduate degrees in Journalism (News and Information) and Communication Studies from the world-renowned home of the Jayhawks – the University of Kansas. She has been practicing law for a decade and spent the first part of her career specializing in helping low-income survivors of domestic violence. Now at Drama-Free Divorce, Crissy enjoys helping people consciously uncouple. She is also a Guardian Ad Litem and domestic mediator. Crissy has won a number of prestigious awards for her work in public service, but you likely recognize her from her acting career, where she is also an award-winner. In her free time, she enjoys spending time with her egregiously overpriced dog, Augustus Rodham and knitting. 

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