A Chapter 13 bankruptcy typically takes three to five years to complete. But life rarely stays the same during that period. If you filed a joint Chapter 13 case with your spouse, a divorce could affect your pending bankruptcy significantly. Read on to learn more about what happens if you get a divorce during Chapter 13 bankruptcy and your options for completing your case.
If you and your spouse hired a bankruptcy attorney to file your Chapter 13, your lawyer represents both of you. But 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 may cause a conflict of interest between the two of you that requires your bankruptcy attorney to withdraw from representing you. For this reason, you’ll want to talk to your attorney and determine the appropriate course of action in your case.
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.
Even if you get divorced during your Chapter 13 bankruptcy, you can still continue making your regular plan payments. But if you can’t work out how to divide your payment with your ex, this may not be possible. Also, the financial burden of divorce and maintaining two separate households typically doesn’t allow debtors to afford their regular plan payments.
Maintaining two households costs a lot more money than running a single household. If you weren’t originally able to 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 keep in mind that 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.
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.)
If you don’t want to be in the same bankruptcy as your ex-spouse, you can also petition the court to bifurcate (separate) your case into two separate bankruptcies. Once bifurcated, each person can decide whether it’s in his or her best interest to convert to Chapter 7 or remain in Chapter 13.