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
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
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.
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.