If My Ex Filed Bankruptcy How Will It Affect Me? - Frank J. LaPerch, PC

What Should You Do If Your Ex Files for Bankruptcy?

You divorced your spouse in an effort to break the ties that bound you together, emotionally, legally, and financially. Unfortunately, for most couples, it is impossible to completely severe these ties once they are created. As strong as your desire to move forward and begin a new life, there will be certain things that could cause your lives to be linked forever. For many, bankruptcy is the culprit.

The biggest issue you need to worry about when an ex files for bankruptcy is how it will affect the money he or she owes you or your child, assuming there is any. In many cases, the need for bankruptcy is brought on by having to make child or spousal support payments. Filers often owe back child support and one of the most common questions attorneys hear is “will I no longer get child support if my ex files?” Luckily, child support payments cannot be written off in a bankruptcy, so in many cases, you can expect the payment process to improve once your ex has filed. More information about child support and bankruptcy can be found here.

Another concern when an ex files for bankruptcy is how it will affect shared property. Most marital property is split during the divorce, but if you owned a home together and agreed to continue shared ownership to make the transition easier on the children, you are likely concerned what will happen with the house.

Some people even receive calls from creditors when their ex falls behind on credit card payments. It can be pretty scary when the cards were jointly owned and the creditors are telling you they will hold you responsible for your ex’s debt.

If you are dealing with any of these issues, do you need to panic? Probably not. However, it is a good idea to speak to an attorney. There are several things you need to consider and an experienced attorney will help you sort through your situation and determine the next best step.

What is important if your ex is nearing or about to file for bankruptcy?

How Long Has it Been Since Your Divorce?

If it has been just a short time since your divorce, notify your divorce attorney when you find out about your ex-spouse’s bankruptcy. Cases like this are pretty common, but it is important you work with someone who understands how divorce and bankruptcy work together. If your divorce attorney has limited experience with this he or she can refer you to a bankruptcy attorney.

Do You Need an Attorney?

It might surprise you to realize you need a bankruptcy attorney if it is your spouse filing. This is for your own protection. Working with a professional that understands bankruptcy laws will save you from a lot of frustration and financial risk. You need access to as much reliable information as possible and a bankruptcy attorney can provide this.

A bankruptcy attorney will also ensure you receive the money you are owed from your former spouse. Child support and alimony payments cannot be discharged in a bankruptcy. In a way, you and your child are similar to creditors when your spouse files for bankruptcy – you need to take action to receive the money you are owed. The difference is you are legally guaranteed that money.

All in all, if your former spouse files for bankruptcy, it has minimal bearing on you. Still, it is important to protect your rights and make sure you understand everything you need to know.

There are complexities that can arise in discharging joint debt. For example, if your divorce agreement or judgment requires your spouse to pay or share certain debts then he or she cannot escape them through a Chapter 7 and they will be non-dischargeable. But, if your spouse files a Chapter 13, then it is possible to discharge some divorce debts such as equitable distribution. This could result in you receiving pennies on the dollar.

In addition, while support is never dischargeable in a Chapter 7 or Chapter 13, the bankruptcy court has final say on whether a certain listed debt is in fact support or equitable distribution.

This means something you thought was non-dischargeable because it was termed ‘support’ in your divorce agreement, may be found to be only equitable distribution and dischargeable in your spouse’s Chapter 13. And of course, it can work the other way and something that was termed equitable distribution could be found by a bankruptcy court to be more akin to support and non-dischargeable. This is why responding and objecting where appropriate is crucial.

The bottom line is this area of the law is very complex and involves both matrimonial and bankruptcy law. It is very important to quickly respond if you are on the receiving end of your ex-spouse’s (or soon to be ex’s) bankruptcy filing. A brief meeting with your divorce and bankruptcy attorney can address any issues before they become problems.

In addition, often this issue is addressed during the divorce proceedings. If there is a lot of debt, it makes sense to discuss with your divorce attorney if there is any need to consider bankruptcy options now or at least keep in mind the potential dischargeability issues when drafting the agreement. Sometimes, spouses who are divorcing are in agreement on one thing and that is the need to potentially file bankruptcy before the divorce and make the ensuing divorce issues simpler.

Has your ex-spouse alerted you to his or her intention to file for bankruptcy? Do you know your ex is in financial trouble and you are assuming bankruptcy is the next step? We can help. Contact the law office of Frank J. LaPerch, PC at 845.942.5500.

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