Bankruptcy and Family Law

Filing for bankruptcy can bring up many family law issues, and the two often seem to go together. Struggling financially can cause a strain in a marriage or lead to issues with child support. If you are struggling with debt and want to gain control of your financial situation, a Nevada bankruptcy attorney can help you explore your options and how bankruptcy will affect your situation.

Divorce and Bankruptcy

Bankruptcy and divorce often go hand-in-hand with the bankruptcy coming before or after the split. A few areas in which bankruptcy and family law can intersect include:

• One spouse filing for bankruptcy after divorce to escape consequences of the divorce or debts that were shared,
• One spouse filing for bankruptcy while the couple is still married, and
• One spouse transferring assets to a non-filing spouse during a break-up.

Bankruptcy may occur before or after divorce, but it is usually more affordable to do so before the divorce to save on court fees and attorney fees. This can also simplify any issues that come up regarding property division and debts to potentially lower divorce costs.

Sometimes this decision comes down to the income qualification for Chapter 7. If the joint income is too high, the couple may not qualify for Chapter 7.

If only one spouse files for bankruptcy while the couple is still married, it can leave the bankruptcy court trying to sift through many complications. If there are any non-exempt assets, the bankruptcy of one spouse means all community property is at risk and all available assets can be used to pay creditors.

It’s important to note that the 2005 bankruptcy overhaul also means debts arising from a divorce are now non-dischargeable through Chapter 7 and the non-filing spouse does not need to take action. If one spouse files for bankruptcy, the divorce decree will still be upheld as all property settlement debts owed to a spouse, former spouse, or child are non-dischargeable in Chapter 13. These divorce obligations can still be discharged in Chapter 13.

Bankruptcy and Support Orders

Another area in which family law intersects with bankruptcy is support orders that arise from a divorce. Someone who is paying child support or spousal support may need to file for bankruptcy for debt relief, but bankruptcy law treats domestic support obligations very differently than most types of debt.

Once a support obligation is found to be a domestic support obligation, the bankruptcy court considers it a priority debt and it gets the highest priority for payment. Any form of domestic support is considered nondischargeable. The spouse receiving the support is not required to file any type of claim, proof, or objection to the court to enforce his or her rights to continue receiving supports.

While the automatic stay does stop most forms of creditor action during bankruptcy, it does not apply to the enforcement of the collection of alimony or child support. Any wage garnishments collecting past-due support may be stayed under Chapter 7 and Chapter 13. Through Chapter 13, the debtor can propose a repayment plan to repay the past-due support over three to five years.

Contact a Bankruptcy Attorney in Las Vegas

Bankruptcy and family law often go together and introduce serious complications in an otherwise straightforward bankruptcy filing. If you own joint property with a former spouse, owe child support or alimony, or are in the middle of or recently completed a divorce, it’s important to consult with a skilled bankruptcy lawyer in Las Vegas to understand how bankruptcy will affect you and your former spouse. Contact the Vegas BK today for a free consultation with an experienced Nevada bankruptcy lawyer to discuss your case.