How Does Bankruptcy Affect a Pending Divorce Case?

If you have a pending divorce case, filing for bankruptcy can cause delays and complications in your divorce case. It will not affect actions to establish custody or child support, but it will stop the ongoing divorce proceedings related to property division.

Bankruptcy Creates an Automatic Stay on Property Division

When you file for bankruptcy, almost all of your property becomes property of your bankruptcy estate. In addition, an automatic stay goes into effect that prohibits all actions to obtain or exercise control over the property of the bankruptcy estate. This includes proceedings to divide the property of the estate during divorce.

The next steps in your divorce typically depend on whether you file for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7 Bankruptcy

If you file for Chapter 7 or Chapter 13 bankruptcy, the court will appoint a bankruptcy trustee to administer your case. In Chapter 7 bankruptcy, the trustee can sell your nonexempt property to pay your creditors. If you file for bankruptcy during your divorce, the trustee will have to determine which assets are property of the estate and whether they should be sold to pay your creditors.

If you own joint property with your ex, the trustee might even be able to sell the entire asset if you can't exempt the value of your interest in the property. If the trustee determines that your ex-spouse's interest in the property is not part of your bankruptcy estate, the trustee would pay your ex the value of their interest from the sale proceeds.

Learn more about your property in Chapter 7 bankruptcy.

Chapter 13 Bankruptcy

The trustee in Chapter 13 bankruptcy doesn't sell your property to pay creditors. However, the amount of nonexempt property you own affects how much you must pay unsecured creditors through your repayment plan. This means that the trustee will still need to determine the value of your property interests.

In addition, Chapter 13 repayment plans take three to five years to complete. For this reason, you or your ex will typically need permission from the bankruptcy court to continue dividing your property in the divorce.

Learn more about how Chapter 13 bankruptcy works.

Automatic Stay Exception for Custody and Domestic Support Proceedings

While the automatic stay can stop the division of property in a divorce, it doesn't apply to actions to establish custody or child support. If you are in the process of determining who gets custody of your children or whether either spouse will have to pay child support, filing for bankruptcy will not prohibit those proceedings from moving forward.

Learn more about the types of lawsuits you can stop by filing for bankruptcy.

Talk to a Bankruptcy Attorney

There are many areas where bankruptcy law and divorce law can overlap. In some circumstances, filing for bankruptcy during your divorce can cause unnecessary delays or complications. If you have an ongoing divorce case, talk to a knowledgeable bankruptcy attorney in your area to learn how filing for bankruptcy might affect your pending divorce.