Skip to main content

QUESTION OF THE WEEK: Bankruptcy or Divorce, which should come first?

If I am facing both divorce and bankruptcy, should I file for bankruptcy before, during, or after filing for divorce?
Answer: When a bankruptcy is filed, all lawsuits against the debtor are immediately stayed. If a bankruptcy is filed during a divorce case, the automatic stay applies to the divorce case as well. The divorce Judge may proceed on issues of child support, alimony and custody of children, but may not make any decisions relating to the division of assets and debts without the permission of the bankruptcy court, and any decisions made by the divorce Judge are reviewable by the bankruptcy Judge.
Finishing the divorce action before beginning the bankruptcy filing allows the divorce action to proceed to its natural conclusion without interruption by the bankruptcy court. It is still possible, though, for the Bankruptcy Court to undo the Agreement or Judgment of the Divorce Court if it appears the parties were attempting to defraud creditors (for instance if all of the assets were transferred to the non-debtor spouse rather split equitably). Despite this risk, it is unlikely if the division is equitable that there would be any issue, and both cases would like proceed more smoothly one after the other, rather than simultaneously.
Likewise, there are certain circumstances where it might make more sense to file for bankrutpcy prior to filing the divorce. For instance in a case where both spouses had significant debt, they can file as joint debtors so long as they are still married.
Even if only one of the parties intended to file, there is a recent case which suggests that some of the protections for the debtor extend to the non-debtor spouse (protections that might not apply if the parties are already divorced). For an excellent explanation of this case visit the Bankruptcy Law Network post titled: Actions Taken Against Non-Debtor Spouse Violate Discharge Injunction.
You should consult with an attorney that is familiar with both bankruptcy and divorce law to determine the best course of action in your specific case. The facts of your case, such as the terms of the proposed property settlement or transfers of property under the agreement may be hurtful to your bankruptcy case if you plan on filing for bankruptcy shortly after the conclusion of your divorce matter. Having an attorney that can explain the bankruptcy consequences of your decisions during your divorce will be critical in helping you get your fresh start.

Comments

Popular posts from this blog

What is the purpose of the Divorce Nisi waiting period?

In Massachusetts the statutory waiting period after a Judgment of Divorce and before the divorce becomes final (or absolute) is called the Nisi period. After a divorce case settles or goes to trial, a Judgment of Divorce Nisi will issue and it will become Absolute after a further ninety (90) days. This waiting period serves the purpose of allowing parties to change their mind before the divorce becomes final. If the Judgment of Divorce Nisi has issued but not become final yet, and you and your spouse decide you don't want to get divorced, then you can file a Motion to Dismiss and the Judgment will be undone. Although many of my clients who are getting divorced think the idea of getting back together with their ex sounds crazy, I have had cases where this happened. In addition to offering a grace period to change your mind, the Nisi period has three other legal effects: 1. The most obvious effect of the waiting period is that you cannot remarry during the Nisi period, be

Does a Criminal Record affect Child Custody?

If one of the parents in a custody case has a criminal record, the types of crimes on their record could have an effect on their chances of obtaining custody. In custody cases the issue is always going to come down to whether or not the best interests of the child might be affected. In the most extreme case, in which one parent has been convicted of first degree murder of the other parent, the law specifically prohibits visitation with the children until they are of a suitable age to assent. Similarly, but to a less serious degree, in making custody and visitation determinations the court will consider crimes that would cause one to question the fitness of a parent. These types of crimes would obviously include any violent crime convictions which could call into question whether the children would be in danger around a parent who has shown themselves to resort to violence when faced with conflict. In addition, drug and alcohol abuse offenses would call into question a parent&#

What happens after my Divorce Agreement is approved by a Judge?

If you filed a Joint Petition for Divorce in Massachusetts then you will participate in an uncontested divorce hearing and the Judge will then issue Findings of Fact the day of the hearing.  A Judgment of Divorce Nisi will issue after thirty (30) days, and it will become Absolute after a further ninety (90) days. This means that if you file a Joint Petition for Divorce you are not legally and officially divorced until 120 days after the divorce hearing date. If you filed a Complaint for Divorce  then your case will end either with a trial (if you don't settle) or an uncontested divorce hearing (if you settle).  If you reach an Agreement, then a Judgment of Divorce Nisi will issue and be effective as of the date of the uncontested divorce hearing, and it will become Absolute after a further ninety (90) days. This means that if you file a Complaint for Divorce you are not legally and officially divorced until 90 days after the divorce hearing date. Therefore, for 90 - 120 day