Courts do not prohibit a spouse from filing for bankruptcy either before or during divorce proceedings, but bankruptcy filings may impact the length and cost of obtaining a divorce. Further, divorcing couples should be aware that a bankruptcy generally does not stop a spouse's obligation to make child support or alimony payments.
Filing Before Divorce
Divorcing couples often file jointly for bankruptcy before starting the divorce process. By filing jointly, the couple can save money on attorney fees in addition to only paying one filing fee. The bankruptcy courts will rule on issues regarding debt and assets, meaning that many property division issues will already be settled before going through the divorce process, saving time and money for the couple. Couples are particularly likely to jointly file for bankruptcy before divorce if they have a great deal of debt or live in a community property state. In community property states, such as California, both spouses are equally responsible for marital debt. If only one spouse files for bankruptcy after the divorce, the other spouse might still be liable for the marital debt.
Filing During Divorce
Either spouse is able to file for bankruptcy during the divorce proceedings. Sometimes a spouse might pursue this option to delay the divorce process. After a spouse has filed for bankruptcy, the bankruptcy court can intervene in the divorce proceedings, which may lead to a more time consuming and costly divorce. However, if the couple does not have any assets that are subject to bankruptcy, filing for bankruptcy during divorce proceedings may not have any effect on the divorce.
Alimony and Child Support
A bankruptcy will not discharge alimony or child support obligations. Whether the court ordered a spouse to pay alimony or child support before or after the spouse filed for bankruptcy does not change the spouse's obligation to continue making support payments. However, divorce settlement agreements and divorce decrees must clearly state when payments are for child support or alimony, rather than a simple division of property or debt between the spouses.
Chapter 13 Bankruptcy
As opposed to a straight bankruptcy under Chapter 7, a Chapter 13 bankruptcy allows the debtor to create a plan to pay off all or a portion of his debt over a period of time. If a spouse files for Chapter 13 bankruptcy following a divorce, he may receive more lenient payment terms for child support and alimony than what was established by the divorce decree. While support obligations will not be discharged, the spouse making support payments under a Chapter 13 repayment plan may find it easier to catch up on any arrears as a result of the smaller payments he is able to make over a longer period of time through the repayment plan.