Divorce & Bankruptcy Keller Texas

Bankruptcies and divorces have serious impacts on each other. When one or both spouses file bankruptcy, all the community property, that is, property that was bought or acquired during the course of the marriage, becomes a part of the bankruptcy estate and is available to pay debts. The estate is all of your property that you own at the time the bankruptcy is filed.

When you or your spouse file a bankruptcy, an automatic stay immediately prevents creditors from collecting on most debts. The automatic stay also prevents you from moving forward in a divorce proceeding.  In order to move forward with the divorce, your bankruptcy attorney will need to work closely with your divorce attorney to have the say lifted.  Once the stay is lifted, you will be able to proceed forward with the divorce.

A bankruptcy court will also need to decide that property is "exempt," that is, it is not part of the bankruptcy estate and so it is not available to be sold to pay debts, a divorce court can then divide that property. These exemptions are defined by federal law (the "Bankruptcy Code"), and the law of the state in which the bankruptcy is filed.

Entering into a property settlement in the midst of bankruptcy is complicated. Debts related to a settlement may be presumed to be "nondischargeable" in bankruptcy, meaning that the person who files bankruptcy can't have those debts wiped out and must still be responsible for them. But the bankruptcy court will often wipe out those debts of the person filing for bankruptcy.

If you believe your spouse is contemplating bankruptcy after your divorce is final, you will want to discuss how to word your property settlement and decree of divorce with your attorney in such a way that your ex's obligation looks and acts as like a support obligation instead of a property settlement to avoid having that debt discharged.

For more information on filing for divorce when you have, or will, filed for bankruptcy contact Setzer Law Firm PLLC.