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People who face both insolvency and divorce may encounter several rather unique problems that should be considered early on. This problems should be considered by bankruptcy counsel prior to the divorce or community property settlement. Some of those issues are the following:
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The filing of a bankruptcy may temporarily halt proceedings in divorce court.
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The filing of a bankruptcy may temporarily halt the collection of alimony.
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The filing of a bankruptcy may have the effect of utilizing property owned or controlled by the estranged spouse to pay the debts of the debtor.
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Although it is unlikely, the way a divorce decree is composed can have a significant effect on a future bankruptcy - and vice versa - a future bankruptcy may have a significant effect on a pre-existing divorce decree.
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The filing of a congenial and cooperative bankruptcy before a divorce can have the effect of doubling the amount of assets kept by the parties through the bankruptcy.
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The effect of filing a bankruptcy before a divorce can have the effect of avoiding the divorce by changing the entire climate in the home.
The bankruptcy code contains strenuous provisions to protect those entitled to court order or mutually agreed support and obligations assumed in a divorce decree. The bankruptcy code is now written to exclude most family law issues and to insulate alimony and child support from the effects of bankruptcy. One exception to this is found in Chapters 13 and 11 where back alimony can be paid out over time and where the obligor assigns her rights to alimony or child support to the state.
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