Divorce During Chapter 13 Bankruptcy

A Chapter 13 bankruptcy typically takes three to five years to complete and filing for divorce during that time could affect your pending bankruptcy significantly. Read on to learn what will happen if you get a divorce during Chapter 13 bankruptcy and your options for completing your case.

Options for Completing Your Bankruptcy

Getting a divorce during Chapter 13 bankruptcy can make it harder to complete your repayment plan. But it doesn't mean that you have to dismiss your bankruptcy. If you want to continue with your bankruptcy and obtain a discharge, here are your options.

Continue Making Regular Plan Payments

Even if you get divorced during your Chapter 13 bankruptcy, you can still continue making your regular plan payments. But this might not be possible if you can't decide how to divide your payment with your ex.

Also, the financial burden of divorce and maintaining two separate households typically doesn't allow debtors to afford their regular plan payments.

Convert to Chapter 7 Bankruptcy

Maintaining two households costs a lot more money than running a single household. If you couldn't originally qualify for Chapter 7 bankruptcy because you had too much disposable income, your increased expenses might now allow you to convert your case to Chapter 7.

But a Chapter 7 bankruptcy might not necessarily be in your best interest. If you were trying to save your house from foreclosure or paying back nondischargeable priority debts, such as recent tax obligations, in your Chapter 13, it might not make sense for you to convert. You could lose your house and find yourself facing tax collection issues.

Modify Your Repayment Plan

If you can't or don't want to convert your bankruptcy to Chapter 7, you might be able to lower your Chapter 13 plan payments through a modification. Because your budget now includes expenses for two households, you won't have as much disposable income to pay into your Chapter 13 plan.

If you're primarily paying secured and priority debt, such as house payment arrears and taxes, it's unlikely that you'll be able to adjust your payment much. The judge can only adjust the amount paid to general unsecured creditors, like credit card balances, medical bills, and personal loans.

You'll make the request by filing a motion with the court asking to reduce your monthly plan payment so that you can continue with your Chapter 13 bankruptcy and get a discharge.

Learn how to modify your Chapter 13 plan payment.

Dismiss Your Chapter 13 Bankruptcy and Refile Separately

If you don't want to be in the same bankruptcy as your ex-spouse, there's a simple solution. Stop making the payments, and the bankruptcy court will dismiss your bankruptcy case. Afterward, you and your spouse can each decide whether to refile bankruptcy.

However, you'll likely want to decide whether this strategy makes financial sense before finalizing the divorce. A bankruptcy lawyer can advise you about the best approach and whether the court can accommodate you in another way (perhaps by splitting the payments between you).

Your Bankruptcy Attorney Might Have to Withdraw

If you and your spouse hired a bankruptcy attorney to file your Chapter 13, your lawyer represents both of you. However, attorneys aren't allowed to represent clients who have a conflict of interest with each other.

If you and your spouse are getting a divorce, this could cause a conflict of interest between the two of you that requires your bankruptcy attorney to withdraw from representing you. A conflict of interest occurs when your goals no longer align, and each spouse would benefit from a different outcome.

For this reason, you'll want to talk to a separate attorney to determine the appropriate course of action in your case.