It can be an extremely difficult time if you are considering filing for divorce or currently in a divorce. This is especially true if your ex is filing for bankruptcy. You may not be sure how this will affect you or your assets. So, how does a bankruptcy affect you?
Bankruptcy and Divorce
Sometimes, spouses split up the community property debt in family law. However, creditors can go after the other ex-spouse. This can happen despite the court order splitting up the debt. Creditors do not care about family law orders!
This means that even if your ex-spouse files for bankruptcy, you can still be held responsible for the debt if you are a co-signer or joint owner. You will want to speak with a qualified bankruptcy attorney to discuss your current situation. This will give you a better idea of what options will work best for your situation.
Unsure what is an unsecured debt? An example of unsecured debt is credit card debt. Does your spouse have a legal obligation to pay on your unsecured debt? If so, the family court created an obligation between the two of you. This does not include the third party creditor (credit card creditor). Meaning, if your ex-spouse does not continue making payments, the creditor will be able to come after you regardless of the family court’s obligation.
So, if your family law court order was for support, you will need to go back to family court for a remedy. This will either result in your ex-spouse needing to pay additional support to you, which cannot be discharged through their bankruptcy. If the family court order was for something else, like an equalization payment and your ex filed for Chapter 13, you will need to file a proof of claim in the case.
Here’s What You Need to Know
- When Did Your Ex File? It is important to know when the bankruptcy was filed, so you can speak with your attorney with enough time.
- What Chapter was Filed? Depending on what chapter of bankruptcy was filed, you may have more protections under the automatic stay. For example, if your ex filed a Chapter 7, you as the co-signer will become responsible to repay the debt(s). If your ex-spouse filed a Chapter 13, then your ex is completely responsible for all debts in their name. However, you may be at risk of being sued by the creditor to recoup the remaining money that was not collected from your ex’s court-administered payment plan.
Please be sure to speak with a bankruptcy attorney to go over all of your obligations and rights as soon as you find out about your ex-spouse’s intentions to file or filing.
Is My Retirement Protected?
Yes, the automatic stay and exemptions will protect your retirement. Be sure to speak with your attorney for the specific amounts, as exemption amounts vary by state.
Thinking About Selling Your Property?
Typically, the primary residence is considered exempt and protected under the bankruptcy. However, if the property is jointly owned as community property, the property could be sold to pay off a portion of the filing ex-spouse’s debts. The remaining portion that is owed to you will be given to you.
On the other hand, if you are trying to sell a house or property that is still community property, you will be in violation of the automatic stay. It is very important to speak with an attorney about your intentions for selling a home that is considered community property.
Need More Information?
At the Law Office of Daniela Romero, we believe in relationships that are based on trust. Before we work together, we would like you to get to know us. We want you to be sure that we are the perfect fit for you. This will allow you to be completely comfortable sharing intimate and difficult details of your case, so we can offer you representation to the fullest extent of the law. Call us today to set up a free consultation.