The areas of bankruptcy and divorce law may seem like completely separate parts of the legal code. However, many couples choose to utilize bankruptcy in conjunction with a divorce proceeding to discharge old debts and get a clean financial start after the dissolution of their marriage. In 2005, changes to the U.S. Bankruptcy Code affected these intertwined areas of the law. Here is a closer look at how bankruptcy and divorce law affect one another.
Looking at Domestic Support Obligations
A major tenant to remember about the intersection of bankruptcy and divorce is that you can never get out of paying child support or alimony. The bankruptcy code refers to these as “domestic support obligations,” and these financial obligations include money owed to a spouse, former spouse, child of the debtor, or a governmental unit such as a state collection bureau. The priority of the domestic support money has moved up in the bankruptcy priority list, meaning that family claimants get paid before all other unsecured creditors. Additionally, the 2005 changes allow a bankruptcy trustee to liquidate previously exempt property for the benefit of domestic support claimants.
Effects on You and Your Family
The 2005 amendments to the bankruptcy code primarily affect families and individuals who carry domestic support obligations or utilize the automatic foreclosure stay to keep their home. For instance, any property settlements received during divorce cannot be discharged with bankruptcy just because you legally received an overdue unsecured loan from your spouse. Similarly, an automatic stay granted to protect your home from foreclosure would be lifted if the house needs to be split between two spouses.
The best way to deal with the intersection of bankruptcy and family law is to hire a skilled family attorney. St. Louis area residents who need legal advice should contact the legal team at Dixon & Johnston, P.C. by calling (618) 233-1103. We can leverage our decades of experience to help you whether the divorce and bankruptcy processes.
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