Divorce and Bankruptcy

Submitted by Whitney Clark, Esq., of
Jean M. Mahserjian, Esq., PC
Clifton Park, New York

Divorce And Bankruptcy FAQ’S

Q: What Is Bankruptcy?

A: Bankruptcy is a legal way to eliminate your debt. There are two primary forms of bankruptcy, Chapter 7 and Chapter 13.

Q: What Is Chapter 7 Bankruptcy?

A: Only individuals may obtain a discharge in a Chapter 7 proceeding. For most cases, this type of bankruptcy enables the filer to completely eliminate all of their debts.

Q: What Is A Chapter 13 Bankruptcy?

A: Under a chapter 13 bankruptcy, a debtor proposes a 3-5 year repayment plan to the creditors offering to pay off all or part of the debts from the debtors' future income. The amount to be repaid is determined by several factors including the debtors' disposable income. To file under this chapter you must have a "regular source of income" and have some disposable income. Like in a Chapter 7, corporations and partnerships may not file under this chapter.

A: When you file for Chapter 7 Bankruptcy, the Court will issue an "automatic stay".

The automatic stay temporarily stops your creditors from trying to collect what you owe them. While the stay is in effect, creditors cannot legally garnish your wages, seize the contents of your bank account, or go after your property.

A: Depending on how your divorce or separation papers are worded and prepared, some of the obligations set forth in these documents may be discharged in bankruptcy. As such, it is vital that your papers be carefully prepared to protect you in the event of a bankruptcy filing by your former spouse.

A: While your bankruptcy case is pending, your financial issues will be handled by the bankruptcy court which will assumes legal control of the property you own with the exception of exempt property which is yours to keep.

A: Nothing can be sold or paid without the court's consent. You have control, however, with a few exceptions, property which you acquire after you file for bankruptcy.

A: Most filers are able to retain their own property. This is because federal as well state laws provide exemptions for your property. Exempted property is property such as household goods and personal belongings, which you may keep despite your bankruptcy.

A: A bankruptcy trustee will see that your creditors are paid as much as possible on what you owe them. The trustee goes through the papers you file and asks you questions at a short hearing, called the "creditors' meeting," which you must attend. After the hearing, the trustee collects the property that can be taken from you (your nonexempt property) to be sold to pay your creditors.

A: If after you file bankruptcy you change your mind, you can ask the court to dismiss your case. As a general rule, a court will dismiss a Chapter 7 bankruptcy case as long as the dismissal won't harm the creditors. Usually, you can file again if you want to.

A: At the end of the bankruptcy process, most of your debts will be discharged by the Court. You no longer legally owe your creditors. You can't file for Chapter 7 bankruptcy again for a set number of years after the date of your filing.

A: Certain categories of debts cannot be discharged in Chapter 7 bankruptcy. These are called nondischargeable debts.

Q: Do I Have To Pay My Bills During The Bankruptcy Proceeding?

A: Generally, you do not have to pay your bills during the bankruptcy proceeding. For specific property (usually secured) such as your car loan or your houses mortgage that you plan on keeping you should probably continue to make payments. Also, for day to day expenses such as rent and utilities you should also continue to make payments. You should stop making payments on other old debts incurred prior to the bankruptcy such as credit card debts.

A: Back child support or alimony obligations, and debts considered in the nature of support, can not be discharged in bankruptcy. An attorney can help ensure that your former partner’s divorce obligations cannot be discharged in a bankruptcy filing.

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