Wednesday, April 25, 2012

My ex-spouse filed bankruptcy -- now what?

The disturbing news that often comes after a divorce is that one's ex-wife or ex-husband filed bankruptcy. Your ex-spouse may be responsible for child support and debt payments, so what happens when he or she files for bankruptcy protection? In many routine cases, you will not be harmed or even inconvenienced, but be aware that a rigid set of deadlines has been set according to the filing date. Here are some of the issues:

Child support and alimony: Bankruptcy filings do not stop the collection of these obligations. If your ex-spouse is in arrears, you can proceed with divorce court actions to collect this money. You may or may not need to deal with a trustee on the collection of arrearages, depending on who is in the control of the funds. In a Chapter 13 case, the payment of arrearages may be scheduled, but they are a priority debt, so the success of the plan depends on you getting paid. If you are receiving late payments through a Chapter 13 plan, you are probably in a better position to be paid than if there were no bankruptcy case filed.

Mortgage payments, car payments, and other debt payments: If your ex is responsible to you for some or all of your debt payments according to your divorce papers, bankruptcy will probably not change this. These payments may be defined as domestic support obligations (like child support and alimony). If they are not, then this obligation is still something that cannot be discharged, so long as your divorce papers made your ex responsible to you for their payment.

Attorney's fees: If your ex is responsible for paying your divorce attorney, this can go one of two ways. It could be a standard debt to be discharged in bankruptcy, but often this obligation is a domestic support obligation. The theory behind Georgia court orders to pay the other party's lawyer is that this is a type of alimony which allows the other party a fair chance at representation in court.

Property settlements: In a Chapter 7 case, an obligation to make payments to an ex-spouse as a property settlement cannot be discharged. The question that needs to be determined, though, is whether the obligation is a property settlement or some type of support obligation.

Generally, you do not need to get involved in your ex-spouse's bankruptcy case to protect your rights to receive alimony or child support. The Bankruptcy Code excepts these obligations from discharge and excepts them the automatic stay which stops the collection of other debts. Your right to receive payments from your ex for debts in your name will not go away if your divorce decree addressed them properly. In fact, these types of obligations are understood to be excepted from discharge, so you do not need to file an objection in the bankruptcy court to determine that they are not going to be discharged. Your ex's bankruptcy filing is probably a good thing for you so that you will not be competing with his or her other creditors after the other debts are discharged.

However, your rights could be affected, particularly in a Chapter 13 case, so for the more tricky situations you should consult a lawyer as soon as you learn about the bankruptcy filing, and that means before the scheduled meeting of creditors (which could be as soon as 21 days after the notice of filing). If you need a lawyer to represent you in bankruptcy court, your lawyer may need the opportunity to ask your ex questions at that meeting.