Divorce and Bankruptcy

Bankruptcy by itself can be a complex process. Add in issues of community debt and separate debt that may arise during a divorce and the situation can become even more confusing. A divorce can affect your bankruptcy and vice versa.

Couples may file bankruptcy jointly or separately. When filing, a petitioner will need to list all community assets,community debt, separate assets and separate debt. Separate property or debt is defined as that property or debt that was brought into the marriage. Community is property or debt that was purchased after the marriage of that thru title belongs to both spouses known as the "the community".

Discharging separate debt is fairly simple compared to discharging community debt. Discharging community debt before a divorce can cause issues because creditors are not legal obligated by a divorce decree. For example, a couple have a joint credit card with a balance of $10,000. As part of the divorce the husband agrees to take on the $10,000 credit card debt in exchange for the wife being responsible for one of the other community debts. After the divorce is final the husband files separately for bankruptcy. Because the credit card is in both names the husband is removed from responsibility and if he does not continue to pay the balance the wife could be held responsible by the credit card company for the remaining $10,000 balance.

Another typical scenario that arises when adding a bankruptcy petition while filing for divorce is when one spouse has significant separate property and the community has significant debts. This spouse with the separate property may not be interested in joining the other spouse in the bankruptcy and will need to negotiate with the other spouse to divide the community debts in way that aligns with the bankruptcy.

Spouses who file for bankruptcy during a divorce need to be aware bankruptcy court can put all civil litigation on hold,including a divorce, until the bankruptcy has been discharged or dismissed. And potentially the bankruptcy court could request that the separate and community property issues be heard in bankruptcy court instead of family court. This is rare yet possible.

Occasionally there are bankruptcy questions that arise after a divorce. Don’t expect to get back from your spouse any money you pay on the balance of a debt your spouse discharged in bankruptcy: the bankruptcy law is designed to let him or her wipe the slate clean. However, your family law judge can at least take into account the fact that your spouse has an increased ability to pay support, or a decreased need for support, as a result of the bankruptcy.

We are often asked if a spouse can discharge spousal support or child support by filing bankruptcy. Support obligations that are not dischargeable include child support, alimony or spousal support. Actually a judge may take into account the fact that your spouse has an increased ability to pay support as a result of the bankruptcy.

There are many other scenarios that a bankruptcy could affect a divorce. Be sure to consult an attorney if you or your spouse are filing divorce and there is a possibility of a bankruptcy.

Call a Las Vegas Divorce Attorney if you have questions. Call (702) 914-0400.