Bankruptcy and family law appear to go hand in hand. When spouses separate, the family income is insufficient to support two households and their obligations. Or perhaps paying off debts is a better option than arguing about who should pay what. Alternately, the cost of the divorce results in the requirement for bankruptcy relief.
Different laws apply to certain debts.
Each of these family law issues is handled differently by bankruptcy.
When the BAPCPA prohibited any obligation to a spouse, former spouse, or child of the debtor accrued during a divorce or separation case from being discharged under Chapter 7, a significant change was made.
No matter what it’s called where you live—child support, spousal support, family support, maintenance—it cannot be discharged in bankruptcy. See 523(aexclusions )’s to the discharge rule (5).
Real estate division
The partition of property in an ongoing divorce is suspended if one spouse files for bankruptcy. Any choate or inchoate property rights a debtor may have become a part of the estate.
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In contrast to Chapter 7, Chapter 13 allows debts related to the partition of property in a divorce to be discharged. After bankruptcy, the spouses may share any property that survives bankruptcy and is restored to the debtor at the end of the bankruptcy case due to lack of equity or an exemption claim.
In a bankruptcy, debts from the marriage that may otherwise need to be split between the spouses might be dismissed. Recent taxes and student loans, for example, are not eligible for discharge under the Bankruptcy Code and would not be eliminated by filing for bankruptcy. Mortgages and auto loans are examples of secured debts for which personal obligation may be discharged, but the asset’s lien often endures a Chapter 7 discharge.
Most outstanding legal actions are halted by the injunction that a bankruptcy filing creates. It does not stop efforts to appoint a support order, collect child support from post-filing income, handle domestic abuse, or end a marriage without sharing the assets.
It involves much more. It’s common to refer to the meeting of family law and bankruptcy law as the collision of two worlds. These topics will be covered in more detail elsewhere on this website.