Effect of Bankruptcy on Marital Dissolution Proceedings

Many times dissolution proceedings come at the heels of financial stress.  That being said, sometimes couples are forced to consider both bankruptcy and divorce at the same time.  How does the bankruptcy filing impact the dissolution proceedings (and vice versa)?

  • You can file for divorce even though bankruptcy proceedings are underway.
  • However it may be impossible to fully resolve the divorce while the bankruptcy is still underway, as property division is subject to the automatic stay requirements of 11USC Section 362(a).
  • Proceeding with the bankruptcy proceedings is not a violation of the Standard Family Law Restraining Orders on the Family Law Summons.
  • It is best to avoid transfers between spouses during the course of the bankruptcy proceedings, as “Strong-arm” clauses can force such property back into the bankruptcy proceedings.
  • An individual bankruptcy petition by one spouse can be amended to “add” the other spouse.
  • There is only one set of exemptions for both spouses–so bankruptcy post-divorce may make more sense in some cases.
  • Failure to pay child and/or spousal support during a Chapter 11 case can be cause to either 1) dismiss the case or, 2) convert it into a Chapter 7 case.

If you are considering filing for bankruptcy or have questions about bankruptcy, contact the Bodie Law Firm at (818) 377-7413 or by visiting http://bodiebankruptcylaw.com/

 

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