Everything You Need to Know About Divorce and Bankruptcy in PA
If you are going through a divorce and bankruptcy at the same time read more to learn about possible scenarios in PA divorce process.
Bankruptcy or Divorce? Which One Should You File First?
Much like all legal situations, the answer depends on your specific situation and the goal you are trying to accomplish by filing bankruptcy. In some circumstances, even couples contemplating divorce or actively engaged in the divorce process choose to file a joint bankruptcy in order to save on court costs and attorneys’ fees. If there is joint debt and both parties qualify, it may be financially beneficial to file one bankruptcy action.
Can You Get a Divorce While in Chapter 7 or Chapter 13?
Even though Bankruptcy is filed in Federal court whereas divorce cases are filed in state court, you can get a divorce while you are in the process of a personal bankruptcy case. However, when an individual or couple files for bankruptcy, they are automatically surrounded by a ‘protective bubble’ that halts all pending legal actions and prevents any new legal actions from starting. This is known as the Automatic Stay. The parties can agree to have the Automatic Stay lifted so that the divorce case can move forward. If one or both parties does not consent to lifting the automatic stay, the divorce case may be stalled while waiting for the bankruptcy case to conclude. In the case of a Chapter 7 bankruptcy, this may only delay the divorce process by several months. However, if one or both parties file a Chapter 13 bankruptcy the divorce could be stalled for years. It is possible to request that the Bankruptcy Court lift the Automatic Stay over the objection of the debtor spouse so that the divorce can continue.
Can one spouse file bankruptcy without the other in Pennsylvania?
One spouse can file bankruptcy without the other spouse’s knowledge, consent or cooperation. If the non-filing spouse is a co-debtor on any obligation, they will become aware of the bankruptcy filing as they will be notified by the Bankruptcy Court. As with all aspects of divorce agreements, the parties’ final Marital Settlement Agreement should carefully identify the obligations of each party after the divorce and the effect, if any, that a bankruptcy filing would have on the obligations created in the agreement.
Can a Spouse File Bankruptcy and Leave the Other Spouse with Debt?
If a debtor-spouse files a bankruptcy and gets a discharge or their debt in Chapter 7 or Chapter 13, the original creditor will no longer be able to collect from that person. However, if their spouse was a co-debtor and did not also receive a discharge of their debt in bankruptcy, the creditor can still collect from that individual.
Even though a spouse may eliminate the ability of a creditor to collect from them, the divorce court can still equitably address marital debt in divorce. The divorce court can acknowledge that the non-bankrupt spouse will now be saddled with greater debt and can award that spouse a larger share of the marital assets. The divorce court could award the n0n-bankrupt spouse alimony to compensate them for the burden of paying off marital debt.
Can A Spouse Get Out of Child Support or Alimony Payment Obligations by Filing A Bankruptcy?
Filing bankruptcy does not alleviate a spouse’s obligation to pay alimony or child support. Pennsylvania’s child support system is an ‘income shares’ model of support which is based on the earnings of the parents. Child support is considered a primary obligation of a parent and neither current support nor past due support can be discharged in bankruptcy. An alimony obligation cannot be discharged in bankruptcy either. If the bankruptcy occurs before or during the divorce process, it could actually have the opposite effect for the bankrupt spouse. The divorce court could determine the bankrupt spouse has additional funds available for support due to the elimination of his or her debt in bankruptcy and, as a result, require that spouse to pay an alimony obligation to the non-bankrupt spouse.
How Colgan and Associates can help you
Our team of trusted divorce attorneys at Colgan & Associates stand ready to assist with your matter, whether that’s handling bankruptcy in divorce or other family law and property division issues. We proudly offer no-cost phone consultations to individuals so that we may better understand their matter and offer guidance. If you or someone you know is going through a divorce in Pennsylvania, please reach out to us today at (717) 502-5000