Bankruptcy & Divorce Tips

Read these 6 Bankruptcy & Divorce Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Bankruptcy tips and hundreds of other topics.

Bankruptcy & Divorce Tips has been rated 3.0 out of 5 based on 13 ratings and 1 user reviews.
Are Property Settlement Items Dischargeable in a Bankruptcy After Divorce?

Property Settlement Items in a Bankruptcy After Divorce

Items in a court-approved property settlement are presumed to be non-dischargeable in a bankruptcy. However, there is no hard rule about this subject and may be able to have one or more related debts discharged. To have a chance to overturn this convention, you must show that your inability to pay this debt and take care of yourself outweighs the harm that might befall your ex-spouse and/or any minor children who are involved in the divorce. For instance, if you agreed to make credit card payments on former joint accounts, and now you find you do not have the funds to pay your rent or purchase food, you can petition the court to allow you to include these debts in your bankruptcy filing. No real harm would come to your ex-spouse or children, but a discharge of these debts would benefit you greatly.

I Think My Ex-spouse Might Declare Bankruptcy After Divorce. Is There Any Way to Protect My Support and Alimony Payments?

Ways to Protect My Support and Alimony Payments

While alimony and support obligations are not legally dischargeable, cash payments on debts securing property in a settlement agreement may be cancelled. There is no foolproof way to protect yourself but there are a couple of things you could do that may help you.

  • Should your ex-spouse own property (real estate or other personal property) after the divorce, file a security lien, if possible, on the property in question. If the bankruptcy court allows a debt to be discharged, you may be able to exercise your lien and seize the property you have secured.
  • Request an indemnity agreement be included in your final divorce decree. While not as strong as a valid lien, should your ex-spouse convince a bankruptcy court to discharge a marital debt and you are then the target of the creditor's collection activity, you could petition the bankruptcy court judge to enforce your indemnity agreement. This may force your ex-spouse to reimburse you for any monies you are forced to give to the creditor.
Your alimony and/or support payments should remain protected regardless of bankruptcy court decisions on other matters.

How Does the Court Decide What Is Support and What is Property Settlement in a Divorce and Bankruptcy Situation?

Support vs. Property Settlement

First, if at all possible, do not negotiate a property settlement agreement while in the middle of a divorce proceeding. This is both complicated and often dangerous to one or both spouses because of the “dischargeability” situation. To determine whether one or more debts could be declared as dischargeable, the court will normally consider the following information.

  • Will the debt normally end if the ex-spouse remarries or if one or more minor children reach the age of majority (18)?
  • Is the debt due to be repaid in numerous installments or is a lump sum payment due in the future?
  • Are there minor children who could be harmed if the debt is discharged or is all support directed to the ex-spouse only?
  • What is the “overall” situation of the parties (health, education, need for agreed-upon support levels, regular income levels, minor children, etc.)?
The court weighs the benefits that may accrue to the debtor against the need and situation of the other party to the divorce. Normally the debtor will not be granted greater benefit than the level of harm that might be done to the other party and/or minor children.

How Can I Protect Myself in a Divorce If My Spouse Owes Debts and Might Declare Bankruptcy?

Protection in a Divorce and Bankruptcy

If you are to become the ex-spouse who is owed money, you should make every attempt to have the majority of funds classified as alimony or other support. Since these debts are non-dischargeable, you will be protecting your future cash payments as much as possible. The more items that carry debt that you include in your property settlement agreement, the higher the risk that your ex-spouse may convince the bankruptcy court that certain debts should become dischargeable.

What Debts Cannot Be Discharged in a Divorce Bankruptcy?

Debts That Cannot Be Discharged in a Divorce Bankruptcy

The following are debts that cannot be discharged in any bankruptcy, including a divorce bankruptcy.

  • Child support.
  • Alimony.
  • Most obligations in the property settlement agreement.
  • Student loans.
  • Criminal restitution for fraud or crimes of violence.
Obligations in a property settlement agreement are sometimes dischargeable depending on the nature of the debt and the situations of the ex-spouses.

What Will Happen to Child Support Payments If My Ex-spouse Declares Bankruptcy?

Bankruptcy & Child Support

The most important thing you need to know: Child support is NOT dischargeable in any type of bankruptcy. The welfare of minor children is of primary importance throughout the state and federal court system . When you're considering bankruptcy, do not compute any child support payment reduction. Much like the regulations that apply to student loans, child support requirements always remain as mandated by family court. But you still can get some benefit from declaring bankruptcy. Although you cannot erase child support payments, if you file for Chapter 7 protection and most of your other debts are erased, your budget will include new extra cash, which will make it easier for you to make your scheduled support payments on time. Even choosing a Chapter 13 wage earner plan will lower your monthly payments to creditors, leaving you with more available cash to meet your support commitments.

Not finding the advice and tips you need on this Bankruptcy Tip Site? Request a Tip Now!

Guru Spotlight
William Pirraglia
Buy My Book