When Divorce and Bankruptcy Collide

The Bankruptcy Code provides an exception from the automatic stay in the context of a divorce proceeding, which allows an individual to commence or continue a divorce suit. Generally, there are three things that get sorted out during a divorce proceeding: property division, child custody, and spousal and child support. The automatic stay bankruptcy provides will stop any property division but will not stop the determination of custody or payment of support.

Child and spousal support are non-dischargeable debts, meaning that filing for bankruptcy will not provide relief from these payments. In order to change the amount, you can file a modification action with the family court and not the bankruptcy court.

When a notice of bankruptcy is filed with the applicable court of appeals, the bankruptcy action automatically stays the appeal, preventing distribution of what would now be separate property of the nondebtor spouse. Thus, the division of property could be put on hold for a while if you file for bankruptcy before the property is completely divided up.

However, the nondebtor spouse has certain legal options in this case, such as the ability to seek relief by filing a motion to terminate the stay and allow the appeal to continue. If the motion to terminate the stay is granted, the nondebtor spouse can continue the pending appeal, and, if successful, execute the affirmed judgment to enforce the property division and acquire his or her portion of the marital estate free and clear of the remaining creditors.