What Happens When Bankruptcy and Divorce Occur Together?

What Happens When Bankruptcy and Divorce Occur Together?

Divorce is a stressful, life-changing event precipitated by many different causes, including financial difficulties. Indeed, the mere process of separating into two households can create irreparable financial fractures in a family’s budget. Unfortunately, separation and divorce sometimes lead one or both parties to consider filing for bankruptcy while their divorce case is pending.

Divorce proceedings are held in family court, which is a California state court. Family court judges preside over the proceedings, including matters involving spousal support, child support, and property and debt division.

Bankruptcy cases, on the other hand, are filed and heard in the federal court system. In fact, bankruptcy courts are specialized federal courts set up to deal with these issues.

If one or both spouses file for bankruptcy while their divorce proceeding is pending, it is wise to get legal advice right away. These dual proceedings present special issues and can impact the outcome of the divorce, including the property rights of both parties. Here are some examples of issues that experienced counsel can help you understand and protect:

  • whether it is best to file for bankruptcy separately or together, assuming both spouses wish to file;
  • whether it is better to file for bankruptcy before or after a final divorce decree is granted;
  • the effect of the discharge of a community debt on a spouse who does not file for bankruptcy; and
  • the effect of a final divorce decree on a spouse’s ability to discharge a debt in bankruptcy.

At a minimum, if a bankruptcy case is pending, that court will have to approve any proposed division of community property in the divorce case. Additionally, it is important to note that neither spousal support nor child support may be discharged in any type of bankruptcy.

In some cases, when only one spouse files for bankruptcy, it is in the other spouse’s best interest to file a special type of complaint in the bankruptcy case.

If you need assistance in a family law proceeding, you should consult with an experienced California lawyer, especially if bankruptcy is or may become an issue for you or your spouse. The attorneys at the Law Offices of Judy L. Burger will provide authoritative legal support tailored to your specific situation. Make the call today to learn how our attorneys can help: (415) 293-8314.