It is dreadful enough to have to consider divorcing your spouse and all the fear and anxiety that comes with that process. But it appears more daunting when you receive word that your spouse intends to or has filed for Bankruptcy.
How will this affect your child support? How will this affect your alimony? Will there be any marital estate left to divide when the Bankruptcy proceeding is all said and done? What do you do now?
The Bankruptcy Court has federal jurisdiction and as such, it has its own rules and procedures that other courts must follow, including the Family Court. Failure to follow those rules can create more problems down the road for you.
The purpose of the Bankruptcy Court is to give the debtor, the person owing the debts, a fresh start by consolidating the debt that is owed into a more manageable situation and can even discharge debts altogether.
No matter what Bankruptcy proceeding that is chosen by your spouse (Chapters 7, 11, 12, or 13), domestic support obligations are not dischargeable in Bankruptcy. This means that certain payments owed by Court Order, including alimony, child support, or attorney fees and costs, cannot be wiped away in Bankruptcy by the debtor. However, it is important to ensure that these support payments are appropriately preserved by the Family Court so that you have continued protection of support payments even through bankruptcy.
There is much more detail and complexity to this process which, in part, is also based upon the type of Bankruptcy Chapter your spouse files.
It is also important to note that when a Bankruptcy petition is filed, the Bankruptcy Court has exclusive jurisdiction over the debtor’s property, including marital property or that obtained during the marriage. When a bankruptcy petition is filed, this serves to automatically stay the disposition of assets in other proceedings, including the Family Court.
The Automatic Stay in Bankruptcy Court bars any attempted collection or judicial process of any property subject to the Bankruptcy estate, including marital property. How this translates to your divorce proceeding is that the Family Court has no jurisdiction to divide marital assets or debts pending the Automatic Stay. Failure to obey the Automatic Stay, including continued litigation concerning assets subject to the Stay can subject you to fines and injunctions, or other damages.
In such cases, it is incumbent upon you to seek professional advice from a seasoned Bankruptcy practitioner to discuss appropriate filings to attempt to lift the Automatic Stay so that you may proceed with litigation and division of your marital estate in the Family Court.
The Bankruptcy Court is its own fiefdom, and it is important to appropriately navigate the waters between it and the Family Court to avoid unintended headaches.
