How to Protect the Rights in My Divorce Decree from My Ex-Spouse’s Bankruptcy
November 16, 2009 by Oliveros & O'Brien, P.C.
Last month we wrote a blog called "I Need a Divorce and a Bankruptcy: Which Comes First?" In it we addressed that question by looking at some scenarios that our clients have faced. Now in this blog we assume that you are definitely getting a divorce but your spouse has threatened to get out of the divorce obligations to you by filing a bankruptcy right afterwards. Can you protect the rights in your divorce degree and prevent them from being hurt by bankruptcy?
***
We’ll give you some answers to this question here. But if you’re asking about this then you definitely need a coordinated strategy that deals with both your marital and financial challenges. Life can get very complicated, and you need clear and honest legal advice to figure out how to get to where you want to be. Advice that understands both the marital and financial sides, and particularly can protect your divorce decree from a later bankruptcy filing by your ex-spouse. Oliveros & O’Brien can provide this coordinated advice because we have concentrated on these two areas for many years. Most attorneys know one area and not much about the other. With our broader experience, we can help you protect your hard-earned divorce rights.
Can my ex-spouse’s bankruptcy wipe out my rights in the divorce?
A bankruptcy can change some but not all of the rights created in your favor in a divorce decree, but steps can be taken to avoid or minimize that. Here are a number of examples of what can and can’t be affected by an ex-spouse’s later bankruptcy filing:
1) Child and Spousal Support:
For just about all purposes, support payments are not affected by a bankruptcy filing. Usually a person’s filing of a bankruptcy puts an immediate stop to most efforts to collect that person’s debts—including garnishments of wages and bank accounts, set-offs of tax refunds, most lawsuits and court motions. But your efforts to collect support payments—or by the state’s support enforcement agencies--are generally excluded from this aspect of bankruptcy law (called the “automatic stay”). So if you expect to be awarded a certain amount of monthly support payments in your divorce, and your spouse is making noises about filing bankruptcy to stop or reduce those payments, he or she is wrong.
However, if a bankruptcy case is filed after your divorce is final, that bankruptcy will NOT stop your then-ex-spouse from filing a motion in the divorce court to try to lower the support payments. Whether he or she would bother to try this, or whether such a motion would be successful depends on the circumstances. In fact, if your spouse’s financial situation is being improved by the bankruptcy filing—which is often the case—YOU may want to consider filing your own motion to INCREASE support payments. The bankruptcy case would not stop you from doing so.
The one way that spousal or child support payments CAN be affected by a bankruptcy filing is if your ex-spouse owes BACK support AND files a Chapter 13 case (instead of a Chapter 7). Then under most circumstances you (and the state support collection agency) WOULD be permitted to keep collecting on the ONGOING monthly support, BUT NOT on the BACK support—AS LONG AS his or her Chapter 13 Plan provided for full payment of the back support before the Plan was completed. Chapter 13 Plans generally take three to five years to complete, however support obligations are among the highest priority debts to be paid under bankruptcy law so those back support may well be paid more quickly.
2) Joint Debts:
Surprising to most divorcing people, the creditors have NO obligation to abide by the divorce decree’s order about which of you is required to pay your joint debts (debts that both of you owe). So if a divorce decree states that your ex-spouse is to pay a certain joint debt, that does NOT stop that creditor from sending YOU bills, and even suing you and garnishing your wages if your ex-spouse does not pay. Although you would generally be able to then try legally to force your ex-spouse to pay as the divorce decree orders, that can often cost too much to make it worthwhile. Furthermore, if your ex-spouse filed a Chapter 13 case, even that option would not likely be available to you.
3) Property Division:
The parts of divorce decrees which lay out how the family home, vehicles and other personal possessions are to be divided CAN be affected by your ex-spouse’s subsequent bankruptcy filing under very limited circumstances. That’s especially true if that bankruptcy is a Chapter 7 one. This is a particularly complicated area which requires an attorney’s careful reading of the actual divorce decree—or preferably the wise wording of the decree in the first place, with the help of a knowledgeable attorney on your side.
Conclusion
As is clear from these examples, protecting your divorce decree from bankruptcy can get complicated. It is often VERY IMPORTANT to get coordinated legal advice about potential bankruptcy issues before starting your divorce. That way you will be able to reduce any bad effects on your divorce decree from your ex-spouse’s bankruptcy filing. Greg Oliveros and Mike O’Brien have been working together in these two areas for a long time, and can help with the right game plan for your own unique situation. Call us to set up a free consultation. Or call and ask for Greg if you want to talk initially about divorce, and ask for Mike to talk about an ex-spouse’s potential or actual bankruptcy. Our phone number is 503-786-3800. Or click here to send us an email.