Will Bankruptcy Affect My Divorce?

Bankruptcy and divorce often overlap and affect each other in many ways—financial issues can result in separation, while bankruptcy is commonly cited as the leading cause for bankruptcy. If you and your soon-to-be-ex-spouse are considering filing for both divorce and bankruptcy, these are the ways they will affect each other.

1. Automatic Stay

You should never file for bankruptcy and divorce at the same time. Not only can it make things more stressful for everyone involved, it can also cause the two legal matters to disrupt each other. Once bankruptcy is filed, an automatic stay is put into place, which halts creditors from contacting you and puts a freeze on your assets and property. If you file for bankruptcy and then immediately file for divorce, the automatic stay will make it impossible for the court to access and divide assets, since they’re on hold, making the divorce process longer than it needs to be.

2. Chapter 7 Bankruptcy

If you’re looking to eliminate all dischargeable debt, Chapter 7 bankruptcy eliminates it within 3 to 6 months, allowing you to divorce sooner than if you file for Chapter 13 bankruptcy. Since Chapter 13 involves paying back your debt through years of payment plans, it could drag out your divorce longer than necessary.

3. Nondischargeable Debts

Chapter 7 bankruptcy does not eliminate all debt—known as nondischargeable debt. You are still responsible for paying them back, even if all your other debt is gone. Nondischargeable debts related to divorce are alimony, child support, and attorney fees for child custody or support cases.

As you can see, bankruptcy and divorce are delicately intertwined, which is why you need an experienced and knowledgeable attorney by your side. If you need help with these issues, contact our Newport Beach divorce attorneys at Burch Shepard Family Law Group.

Call (949) 565-4158 or contact us online to request a consultation today.