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 can significantly affect your pending bankruptcy. 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 are not allowed to represent clients that 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 you that requires your bankruptcy attorney to withdraw from representing you. For this reason, talk to your attorney so that he or she can 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. In addition, 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 were not originally able to qualify for Chapter 7 bankruptcy because you had too much disposable income, your increased expenses may now allow you to convert your case to Chapter 7.
But keep in mind that a Chapter 7 bankruptcy may 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 may be able to lower your Chapter 13 plan payments. Because your budget now includes expenses for two households, you will not have as much disposable income to pay into your Chapter 13 plan. This means that you can typically file a motion with the court 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 your case is bifurcated, each person can decide whether it’s in his or her best interest to convert to Chapter 7 or remain in a Chapter 13.