Divorce

Divorce

Thursday, January 18, 2018

Bankruptcy and Divorce Proceedings

Since bankruptcy is federal law, the main differences for cases would involve the state laws likely tied to exemptions, the amounts, and the ability to file without jeopardizing the community division in California.  Also some civil law issues may come into play in divorces.



Since not all family law attorneys have practiced bankruptcy, it should be known that bankruptcy is considered not only legally complex, but technically as well.  It rivals the USA Tax Code, and it is routinely changing as well. Debt can be categorized as secured, unsecured or partially one or the other, and a means test is required at the outset just to see if one is qualified to file at all, in theory.
If the hurdle is passed, there are many other considerations, such as the dates of payments, property actually owned or not owned, and countless other questions.  The typical paperwork in a Chapter 7 liquidation is now running about 100 pages (the same filing documents are used, with possible additions, depending on circumstances.)  A Chapter 13 case (repayment plan) may be something that is filed after a Chapter 7 is completed, or it can be filed alone, depending on the debtor's circumstances.  In some instances a Chapter 13 may be the only viable thing available to save a property from foreclosure.

Attorney has first hand knowledge of these scenarios within divorce litigation, including the law and motion hearings in federal court.  Some spouses misuse or attempt to misuse the process to get out of paying support. Rest assured, all support is considered a priority debt and will not be affected adversely unless there is wrongdoing by the non filing party. In fact, attorney fees spent for spousal support in bankruptcy should be claimed in the divorce.  There are so many situations that can either affect, conflict, or ruin a bankruptcy filing that listing them here would not be prudent.  However, the fact that parties in a divorce may face bankruptcy filing while in the divorce, is somewhat dangerous.

All bankruptcy filings are normally public record. The location makes no difference if it is in the USA for the most part. You can access PACER online if you sign up for an account and it is free but you must pay for the copies you make, normally quarterly. If a spouse finds that their other half has filed bankruptcy without notifying them, they should inform their attorney immediately. Attorney has seen a case where the wife racked up over $100,000 of unsecured debt without the husband knowing it; then when he found out, the community property house was stuck in the Chapter 13 they filed.

Further, the wife left the husband and not only kept the house, she got rid of all the debt and likely kept her pension, and she earned about 3 times what he earned yearly.   Attorney refused to settle the case on the unbelievable grounds just stated,  but the husband cracked under pressure and succumbed to family pressure-- but only after attorney forced client to terminate her as attorney.  Attorney does not knowingly allow clients to lose most of their savings, the house, and credit, simply because someone can get away with it.
That was one of the worst cases ever seen, there was no even division of property or anything else actually. The husband just walked away with very little, and had no problem for another attorney helping him draft the deal. Attorney finds such an uneven split (while under emotional upheaval) to be both wrong, and rather oppressive, and would never agree to help a client execute something like that.