Bankruptcy and Effect on Ex-Spouse - Frank J. LaPerch, PC

How Does My Former Spouse’s Bankruptcy Filing Affect Me?

For many divorced couples, the end of a marriage does not mean the end of the relationship. This is true when it comes to parenting and it is also true when it comes to finances. Financial decisions made by your ex spouse can affect you even after you are no longer married. If your ex-husband or wife files for bankruptcy, what do you need to know?

Depending on how long it has been since you finalized the divorce, your former spouse’s bankruptcy might not affect you at all. This is especially true if you have no children and share no assets. It is a good idea to double-check with your attorney to be sure there are no connections that slipped past you, but in general, you have nothing to worry about.

Child Support Payments and Bankruptcy

If you share parenting responsibilities with your former spouse or you are the parent with primary responsibility for your children and your spouse pays child support, it could be a different story. Child support payments are not forgiven in a bankruptcy filing. As a matter of fact, if your spouse owes back support payments and files for bankruptcy, it could actually result in your receiving those payments. Depending on the type of bankruptcy, when his or her assets are liquidated, child support payments will be one of the first things paid out of the estate.

You must file paperwork with the bankruptcy court to ensure the child support debt is honored, so contact an attorney immediately after your spouse has alerted you to his or her filing. Requests must be filed within a certain period of time, so act fast.

Shared Property and Bankruptcy

If there is shared property that has not yet been sold, it will be treated in bankruptcy essentially the same as it would in a traditional sale. While you still will be entitled to your share of an asset, you may not always achieve the highest selling price because of the lower sale price that may occur in a liquidation.

Equitable Distribution

One issue to be extremely careful about is if your ex-spouse filed a bankruptcy and owes you equitable distribution. Spousal and/or child support arrears are not discharged in a bankruptcy, but that’s not always the case with equitable distribution.

If a Chapter 13 bankruptcy is filed, then it is possible an equitable distribution claim may be discharged. The issue can be quite complicated and is not always limited to the characterization in the divorce. The bankruptcy court can review a debt and determine whether it is more in the nature of support or equitable distribution. This can mean the difference between the debt being discharged or not in a Chapter 13.

However, because money from the liquidation of the property could be used to pay creditors, you might receive less than you would in a traditional sale.

You might also have the option of filing an automatic stay, which prevents creditors from collecting on certain assets. This could help you protect money and property that belongs to both you and your ex.

If your former spouse alerts you to a bankruptcy filing, there are a few things you can do to better protect your rights. If you are still in the process of divorce or your divorce was recent, let your attorney know about the bankruptcy. If you are no longer working with a divorce attorney, it is a good idea to contact an attorney that specializes in bankruptcy to assist you and answer your questions. Despite not being the one to file, you need legal guidance from someone who understands bankruptcy laws.

Keep in mind there are deadlines associated with bankruptcy filing, so you will need to act quickly. Hopefully your former spouse notified you as soon as he or she decided to file. This gives you plenty of time to get things sorted out and take action, if necessary.

The most important thing you can do to protect yourself in relation to your ex’s bankruptcy is to contact an attorney. If you have questions or you would like to discuss your case, contact the law office of Frank J. LaPerch, PC at 845.942.5500.

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