If you want your divorce to be over as quickly as possible, you may want to wait until your divorce is final before filing for bankruptcy. While filing bankruptcy will not stop divorce proceedings, the automatic stay, which stops almost all lawsuits against the filing debtor, may hinder your ability to get through a property settlement.
An automatic stay occurs immediately when a person files bankruptcy, and while it may stall a divorce, it will not stop it. The automatic stay prevents almost all lawsuits and collection efforts against a debtor unless the bankruptcy court grants a motion to “lift the stay”. However, the stay does not stop the court from establishing paternity, establishing or modifying alimony or child support, or collecting past due support from any property that is not part of the bankruptcy estate. Therefore, the divorce court can collect from wages or assets earned or received after the Chapter 7 is filed. Once the court enters a discharge order, the automatic stay is lifted and the case may proceed.
Child Support and Alimony
Filing bankruptcy does not stop any actions for the establishment or modification of an order of alimony or child support. The divorce court can also collect alimony or child support from any property that is not property of the bankruptcy estate. Filing bankruptcy can actually hurt you in an alimony case; if you're a supporting spouse, discharging your debts leaves you with more income to pay alimony. If you're a dependent spouse, bankruptcy reduces your need.
Chapter 13 Bankruptcy
In a Chapter 13 bankruptcy case, the automatic stay remains in place for the entire Chapter 13 repayment period. However, once the payment plan is confirmed, all property is again subject to collection for alimony and child support orders. Property that isn't part of the bankruptcy estate is subject to actions to enforce alimony and child support. Also, if you wait to file Chapter 13 until after the divorce is finalized, you might be able to discharge some divorce-related debt, such as credit card debt. However, if the court assigned marital debt to you in the divorce decree -- or you agreed to take on joint debt as part of a marital settlement agreement -- your spouse may sue you for reimbursement if you later discharge those debts in bankruptcy, causing creditors to come after her for repayment because they can no longer come after you.
Chapter 7 Bankruptcy
In a Chapter 7 case, which involves the liquidation of assets, the divorce court can collect past due family support from the wages or assets earned or received after the Chapter 7 is filed. Once the debt is discharged, however -- which typically takes three to five months -- the automatic stay is lifted and all parts of the divorce proceed normally. Unlike with Chapter 13, you can't discharge divorce-related debts in Chapter 7.
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