If you’re going through a divorce in Morris County, New Jersey, numerous complex and emotional decisions must be made. These decisions involve life issues such as child support, child custody and visitation rights, division of assets and property, alimony, and more.

If your spouse, or you, also begin legal bankruptcy proceedings, it will further complicate certain aspects of your divorce and, usually stop others from proceeding.

During your pending divorce case, filing for bankruptcy may not affect actions such as  establishing child custody or child support. However, it certainly may halt any ongoing divorce proceedings related to the division of property, asset distribution, etc., or anything that could be affected by your previous financial picture.

If you, or your soon-to-be ex-spouse file for bankruptcy, all property becomes the property of your bankruptcy estate. Additionally, an automatic stay commonly goes into effect that prohibits all actions from holding or exercising control over the property of the spouse’s bankruptcy estate. This would include divorce proceedings to divide property and wealth of the estate during divorce.

In most cases where this occurs, how the legal bankruptcy proceedings will affect your divorce depends on whether the spouse files for Chapter 7 or Chapter 13 bankruptcy.

If a spouse files for Chapter 7 or Chapter 13 bankruptcy, the New Jersey courts will appoint a bankruptcy trustee to administer the bankruptcy case.

For example, in Chapter 7 bankruptcy, the “trustee” does possess the power to sell your spouse’s nonexempt property to pay creditors. This legally translates that if your spouse files for bankruptcy during your divorce, the trustee must determine which of your assets are property of the estate and whether they should be sold to pay creditors.

If you, and your ex-spouse, own joint property, then the trustee might even be able to sell the entire asset if you cannot exempt the value of your interest in the property.

The trustee may determine that your ex-spouse’s interest in the property is not part of your bankruptcy estate. Then the trustee may pay you (or your ex-spouse) the monetary value of their interest from the proceeds of the sale.

Much of this differs if Chapter 13 bankruptcy is declared.

You can undoubtedly begin to see that if you or your ex-spouse file for bankruptcy during your divorce, it can (and usually will) cause lengthy delays and complex financial issues in your divorce proceedings.

If this situation happens to you, you must obtain a Chester or Morris County New Jersey family law divorce team versed in complex divorce cases. Doing so will give you the complex financial professional advice you need to move forward.

If My Spouse Files Bankruptcy, How May It Further Affect Me?

It is legal and possible that your spouse may file for the debt relief that bankruptcy provides, which will always affect you.

You must know that If your divorce is not finalized, you are legally still married, and the bankruptcy proceedings will affect you. You may still owe some debt if your husband has filed for bankruptcy.

However, the bankruptcy filing will usually appear on the bankrupting spouse’s credit report but should not appear on yours (as the non-filing spouse).

If you, as the non-filing spouse, receive a negative rating on your credit score because of your spouse’s bankruptcy, your lawyer should address the matter immediately!

It’s easily seen how filing for bankruptcy can change the entire financial picture in a divorce. This is precisely why the New Jersey courts will halt any financial decisions until your spouse’s bankruptcy case is finalized.

Can a Bankruptcy Filing Affect “Equitable Distribution” in My Divorce Case?

In any divorce case, “equitable distribution” may be impacted if a bankruptcy filing is a related issue. “Equitable distribution” is defined as the division of property during a divorce, and the Morris County, New Jersey divorce court could find many aspects of it impactful to your divorce.

Some fees, and costs, such as legal counsel fees that parties owe under certain circumstances, may not be discharged in a bankruptcy. At other times they may depend on the specific circumstances of the spouse’s bankruptcy and their holdings.

You must note, however, that any amounts owed in a finalized divorce, such as child support and alimony, must still be maintained. Commonly, there is nothing that your spouse can do to change that. However, your attorney should cover the issue of bankruptcy in your Marital Settlement Agreement.  In a finalized divorce, the Morris County,  New Jersey bankruptcy court does nothing about that, so if your spouse files for bankruptcy, it won’t affect your child support or alimony payments.

However, if the bankruptcy is during your divorce (and it is not yet finalized), the outcome of the bankruptcy may very well affect your ability to collect adequate child support or alimony. This is where your Morris County divorce lawyers’ legal guidance will be invaluable in assuring you and your child’s financial needs are met. Your law team will fight for your rights and yours alone.

In What Other Ways Can a Bankruptcy Filing Affect My Divorce Proceeding?

You must note that your divorce and spouse’s bankruptcy cases are two entirely different matters. However, it’s also vital to understand the concept of the “automatic stay.”

When your spouse files for bankruptcy, the automatic stay immediately begins. This can assist your spouse (as the debtor) and usually will temporarily halt your divorce. This event can always be problematic for you and the outcome of your divorce.

One of the vital parts of a bankruptcy case includes dischargeable debts. When bankruptcy is filed during a divorce, there are often similar requests for these cases. Your spouse may ask to discharge claims of alimony, child support, or property settlements.

These questions are usually up to the judge, but some general rules commonly apply in New Jersey cases, such as:

  • Claims for alimony generally cannot be discharged in the proceeding.
  • Claims for child support generally cannot be discharged in the  proceeding
  • Claims for property settlements may be discharged in the bankruptcy proceeding if your divorce is “in progress.”

I’m Going Through a Divorce, and My Spouse Has Filed Bankruptcy; How Should I Proceed?

If you’re going through a divorce, it’s always a stressful, emotional time, and many life-changing severe decisions must be made. If your spouse also has filed for bankruptcy, it adds an additional elevated level of concern and issues that could impact your financial future enormously.

Obtaining the empathetic, knowledgeable, and experienced advice of a Morris County divorce lawyer versed in complex divorce cases is mandatory. If bankruptcy is added to the divorce “mix,” this is no longer a simple divorce! Get the professional advice you must have to ensure your peace of mind and financial future.