In 2011, a total of 232,593 personal bankruptcies were filed within the State of California. There are many factors that can lead to bankruptcy. These include unexpected medical expenses, job loss, credit card debt, natural disasters, and divorce. In fact, divorce is cited as the case of eight percent of all bankruptcies. Divorce proceedings can cost tens of thousands of dollars or more in legal fees. After the divorce, there is the additional cost of maintaining separate households as well as child support and/or alimony obligations. It is not a surprise that many find themselves financially stretched. Bankruptcy may seem like a solution, but your ex’s bankruptcy may have unintended consequences.
Consult a San Francisco divorce attorney immediately if you are seeking a divorce and your ex-spouse is considering or has filed for bankruptcy. It is important that you know exactly how the bankruptcy will affect you.
Child Support and Spousal Support
The federal Bankruptcy Abuse Prevention and Consumer Act was passed in 2005. This law prevents spouses from using bankruptcy in order to avoid paying child support and/or spousal support. Under this law, support payments are considered priority claims and cannot be discharged during bankruptcy. Your spouse will be required to continue all court-ordered support payments. Any past-due support will still be owed as a debt to you.
Property Settlement Debts During Divorce
Property settlement debts are debts that your spouse owes to you as a result of the division of property in your California divorce agreement. These debts are not dischargeable in a Chapter 7 bankruptcy, but may be discharged in a Chapter 13 bankruptcy.
Credit Card Debt During Marriage
California is a community property state, so any debt acquired during the marriage belongs to both you and your spouse—even if your name is not on the debt. If your ex-spouse files for bankruptcy and does not pay his credit card debt, the lender can seek payment from you. This is true even if your ex agreed to pay the debt during divorce settlement negotiations.
An Example of Hollywood Star in Debt and Divorce
Although actress Lena Headey plays a queen on TV, she is broke in real life.
The 39-year-old actress, who plays Queen Cersei on Game of Thrones, filed for divorce from her husband Peter Loughran last July. She and her Irish-musician ex have been fighting over custody of the couple’s two-year-old son Wylie. Earlier this year, Headey filed papers to prevent Loughran from taking Wylie to Ireland. Now, both Loughran and Headey are seeking an advance on the couple’s tax return.
Early in April, Loughran made an emergency court filing asking for half of the couple’s $46,000 tax return from 2011. Headley replied that she needs at least $6,000 of the return to meet living expenses for herself and her son. A California divorce judge denied that filing.
Headey told entertainment news site TMZ, "At the present time, I have less than $5 in my bank account and have been using credit cards to pay for living expenses for myself and our son Wylie.” According to a 79-page filing obtained by E! News, Headey asked Loughran for $6,000 from her share of their 2011 tax refund. She claims that when she became pregnant with Wylie, she was deemed uninsurable due to the pregnancy and was unable to work. Headey’s inability to work caused the couple to "burn through their savings.” They used credit cards to pay for living expenses. As a result, Headey and Loughran incurred a substantial amount of consumer debt. A hearing has been scheduled for April 26.
Headey and Loughran married in May 2007. The couple separated in 2011, and she filed for divorce in Los Angeles Superior Court on July 20, 2012. The HBO series Game of Thrones is currently one of the most popular shows on TV.
With proper planning, you may be able to protect yourself from your ex-spouse’s bankruptcy. To learn more, contact the San Francisco divorce lawyers at The Law Offices of Paul H. Nathan at 415-341-1144.