Filing for Bankruptcy in a California Divorce

By | September 29, 2012

If you are considering declaring bankruptcy during your California divorce, you really should consult an expert, preferably one in bankruptcy and one in family law. Filing for bankruptcy has a “ripple effect” in other courts in that there is an automatic stay of litigation until the bankruptcy case is adjudicated. This can have ramifications in your family law case. If you are concerned about finishing your divorce case quickly, filing bankruptcy might cause some delay, at least as far as property division is concerned. Of course, you or your spouse might apply for a release of the stay, but why complicate matters and add to your litigation expense. Also, as an aside, you might also consider how your family law will take the fact that you have filed for bankruptcy in the middle of your divorce. He or she is, after all, a potential or actual creditor, depending on how much you’ve run up your tab. There might be a little trepidation about continuing work on your case, as the bankruptcy court can reach into one creditor’s pocket if it finds preferential treatment and take back what was paid so as to fairly distribute it among the other creditors, depending on the facts and circumstances of your bankruptcy case.
The temptation to file bankruptcy for many people paying support, or, more likely, not paying support, is to discharge child support arrears in their bankruptcy case. It is unbelievable how many people would actually consider not making good on their obligation to support their children, but the federal government, in its ultimate wisdom, has saved the children of the nation from the questionable judgment of any parent who seeks to discharge their child support debt in bankruptcy. Child support obligations are not dischargeable in bankruptcy.
The interaction of bankruptcy law with family law is complicated, and you should definitely consult with an expert when considering filing bankruptcy during or after your divorce.