Bankruptcy and Divorce: What to Know~ 2 min read

If you, your spouse, or both of you are in financial trouble, it is important to understand how bankruptcy might affect your divorce and what steps you need to take to avoid setbacks.

You May Need Permission to Proceed with Your Divorce

If you have already filed for bankruptcy, you will likely need permission from the bankruptcy court to move forward with dividing property, setting support payments, or finalizing other parts of your divorce. Custody decisions can typically continue without delay, but anything that involves money or property must go through the proper process with the bankruptcy court.

When you both agree, getting this permission is usually straightforward with a consent motion and order.  However, if you can’t agree, a contested motion may need to be filed with the bankruptcy court, which will add to the time and expense.

Bankruptcy Can Be a Tool, But Only with Caution

In some divorce cases, filing for bankruptcy is part of a broader strategy. If you and your spouse share significant debt, it might make sense to file jointly before or during the divorce. Whether this is possible depends on the type of bankruptcy and how the debt is titled. You or your spouse may only qualify as individuals, while others may only qualify if you file together.

This kind of planning requires cooperation. If you are not able to work together, using bankruptcy in this way can lead to disputes or unintended outcomes. You or your spouse might end up with more debt than expected, or the bankruptcy court may reject the agreement altogether.

What Happens When a Business Is Involved?

If either of you own a business, things can get even more complicated. You may need permission from the bankruptcy court not just to move forward but also to approve your divorce settlement. That can include dividing business property or assigning maintenance payments. In some cases, the bankruptcy trustee can step in and disrupt the entire divorce agreement if it was done without proper approval.

What About Child Support?

Child support is generally not affected by bankruptcy. That said, attempts to use inflated child support numbers to get around bankruptcy rules can lead to problems. In most cases, legitimate support arrangements are allowed to proceed.

Contact Family Ally

If you are facing divorce and bankruptcy at the same time, it helps to work with a legal team that understands how one process can affect the other. Contact Jennifer Piper at 314-449-9800 to schedule a consultation and learn how we can help you protect your rights, your assets and your future.

Family Ally is located at 130 S. Bemiston Ave., Suite 608, St. Louis, MO 63105.