Filing for divorce in the midst of bankruptcy adds another wrinkle to an already contentious and complex process. A bankruptcy filing has the potential to change spousal support, alimony support, and other obligations to a previous spouse.
Moreover, a bankruptcy filing can also change how property is divided. Our Florida bankruptcy attorney is here to help you hold strong throughout bankruptcy and divorce.
How Bankruptcy Changes Divorce
An admission of financial destitution is likely to reduce spousal support obligations. Moreover, such an admission also reduces the amount of property available for division. If some or all of one’s property is to be distributed to unpaid creditors in a bankruptcy agreement, the opposing spouse will receive less or possibly no property at all.
Courts often require divorcees undergo financial analysis to determine how support in the form of alimony payments or child support are to be provided across posterity. Such financial assessments also evaluate assets including real property to best determine their distribution in the spirit of fairness.
In general, the process of bankruptcy generates an automatic stay on property held by marital partners. In plain terms, this means the property cannot be divided, sold, or otherwise transferred until the court deems it appropriate.
Though uncommon, there is the potential for both spouses to file divorce at or near the same time when separating. In such an instance, most, if not all property, cash and other assets are distributed to creditors.
The Bankruptcy Court Decision Dictates the Fate of the Marriage
Family court affairs are shaped by bankruptcy court decisions. In most instances of bankruptcy amidst divorce, the family court judge waits for the bankruptcy court ruling before proceeding. The entirety of marital assets and debts are analyzed in bankruptcy court. Once creditors are accounted for through payment plans, the remaining assets can be distributed according to the family court judge’s ruling.
In some situations, it is possible to file for bankruptcy yet also retain ownership of a portion of a spouse’s assets. As an example, the mutual ownership of joint assets has the potential to lead to ownership retention even after a bankruptcy filing. However, property acquired prior to marriage is likely to be partially or fully protected as separate and distinct from oneself in the event of divorce.
Domestic Support is Likely to Continue
A spouse who files for bankruptcy might not be on the hook for the entirety of an alimony or child support payment obligation. However, that obligation is likely to remain, albeit in a smaller amount or postponed.
In particular, bankruptcy that leads to a significant reduction in assets is likely to pave a path toward a modification of spousal alimony and/or child support orders. However, the bankrupt spouse is to wait until after the court order modification to change his or her payments to the new level.
Unpaid child support and even unpaid alimony support from prior to the declaration of bankruptcy must also be paid for compliance with the court order and the terms of the matrimonial settlement agreement.
Learn More During a Consultation With Our Florida Bankruptcy Attorney
Bankruptcy is a difficult chapter of life. The best part is that you’ll soon turn the page to start the next chapter. Reach out to our Florida bankruptcy attorney today for assistance in the form of an initial consultation.