Category Archives: Divorce

Divorce, Credit Card Debt, and a Chapter 7 Bankruptcy

When my sister divorced, she settled for a lot of her former spouse’s credit card debt in the divorce decree. Now having too much debt for her single salary to ever completely pay off the principal with interest, she had to file for bankruptcy protection. In her case, she filed a chapter 13 bankruptcy to satisfy the divorce decree in paying the debts and because she had a certain amount of non-exempt assets she needed to protect. What about those of you who inherit credit card debt from a divorce and qualify for filing a chapter 7 bankruptcy? Continue reading

Community Property and Bankruptcy Laws

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Community Property Defined

Community property can be defined as a marital property system providing for the creation of a marital estate whereby the assets included in the estate are managed and jointly owned by the individuals married.

The marital property regime, or community property, has been established in civil law in some states in the United States and is associated with common law in other states. The idea of community property carries the idea of equal asset ownership.

Non community property states attempt to divide up the assets of the marital estate depending on who made the contributions of the assets to the estate. Ideally, each asset found in a non community marital regime can be determined as to who owns the property in the case of a divorce within the marriage.

Whether of not a marriage is a community property marriage or a non community property marriage has an influence of the bankruptcy process if either or both of the marital participants file for bankruptcy.

Authority in Dealing with Community Property and Bankruptcy

Federal bankruptcy laws are the primary source of authority for filing a bankruptcy, but the federal laws cannot supersede state community property laws after the fact. A decree made by a state judge on community property cannot be overridden by a decree of a federal bankruptcy judge if the state judge made the decision prior to a client filing bankruptcy or was not privy to the bankruptcy.

An Illustrated Event Where Both Laws Collide

An example of that actually happening recently occurred when a wife was awarded the non community property of the car which was in the husband’s name. The husband still owed money on the car.

The husband, who didn’t challenge the divorce, filed for Chapter 7 bankruptcy protection before the divorce decree went forward. The divorce court was not aware of the where the husband was when notification of the decree went out. The bankruptcy judge was not aware of the divorce decree, and when the bankruptcy closed, the debt on the automobile was discharged.

Unfortunately for the filing husband, the divorce court judge found him in contempt of court when he failed to make the discharged payments for the car. It is at this point the husband began learning the process on the order of events. The wife had kept the car, and it was in the state in which she filed divorce. The wife thought the husband would pay for the car since she won it in divorce court, and the husband thought the loan on the car was discharged in bankruptcy. An arrest warrant was sent out for the husband in the state the wife resided.

What About The Third Party?

On top of that to complicate matters further, neither courts gave consideration to the lien on the vehicle. Liens are not discharged in bankruptcy, and the lien holder had the right after the bankruptcy closed to repossess the car, the true owner.

On the other hand, it would be interesting to see how it eventually played out concerning how the divorce court judge handled the lien.

When Laws Get Complicated, Get you a Bankruptcy Lawyer

When you mix community property with bankruptcy, the laws get complicated. That is why it is wise to have a bankruptcy lawyer on your side when you file such a complicated case.

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Bankruptcy and Your Ex-Spouse

All kinds of financial situations can crop up after a divorce, especially if you leave loose ends undone. One of the biggest financial controversies between two adults who divorce is over the mortgage of the home. How will an ex-spouse’s bankruptcy affect you if you had a joint mortgage?

Even though you have a divorce decree saying who gets what, there are legal implications that must be dealt with in a mortgage contract before any transfer of ownership passes. Mortgage contracts are very legal documents, and there is a process called “closing” that must occur before the documents of title can be transferred. If you mix a bankruptcy court in with the process of a divorce adding an unresolved mortgage contract, you will have a recipe for a potentially legal entangled mess.

A spouse not getting the mortgaged home in a divorce decree, but still having their name attached to the title, can suddenly find there self being pursued by a collection department representing the mortgage company. If you have not legally transferred title, the mortgage company has every legal right to go after both signing parties of the mortgage documents.

Even if you present a divorce decree to the mortgage company stating you are no longer the owner of the property, you will most likely be included in any foreclosure on the property until you legally transfer the title. A mortgage company might feel like they have no other legal recourse than to deal with the entities they made the contract with in the beginning.

One of the things that can stop the collection actions of a mortgage company is for either party of the divorce to file a bankruptcy. The moment you file a bankruptcy, a judge will order all collection actions to cease, an important feature called the automatic stay. The automatic stay, applicable to all types of bankruptcy filings, means that the mere request for bankruptcy protection automatically stops and brings to a cessation certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment.

During the time of the bankruptcy process, both spouses of the mortgage contract will be protected against any further actions of the mortgage company’s collection department by the automatic stay, but when the bankruptcy process is finished, the mortgage company can potentially begin the foreclosure process again.

A foreclosure might have an effect on both of the signing spouses. Upon foreclosing, the mortgage company can potentially seize the property, report to credit agencies both spouses are in default, and hold the non-filing spouse responsible for any monetary deficiencies they might lose on the sale of the home. The filing spouse will most likely have had his or her deficiencies discharged in the bankruptcy process.

What all this means to a non-filing spouse is that you can be sued for the deficiencies, or the deficiencies can become tax liabilities not protected by bankruptcy discharge. A bankruptcy lawyer is one of the few who might be able to help you legally untangle such a mess.

Can You File for Bankruptcy if You are Going Through a Divorce?

Divorce is one of many causes for filing bankruptcy. Can you file for bankruptcy if you are going through a divorce? The answer to the debtor’s question is technically yes, but divorce creates extenuating circumstances that you might want to consider before you file. Filing for bankruptcy after you have already filed for divorce might not be wise in some situations, and it may be the very thing to do in other situations, all depending on your particular situation.

Probably the most influencing factor on whether you file bankruptcy before a final divorce decree is whether you live in a community property or non-community property state. Both types of state laws can impact the type of bankruptcy you file and when.

What might by treated as community property or equitable distribution assets might make a difference on when you might want to file a bankruptcy. In divorce law, community property and equitable distribution are handled by state laws which determine how marital property should be divided by a divorce court.

In bankruptcy cases, bankruptcy laws do not necessarily view community property or equitable distribution the same way as divorce courts do, especially if the divorce has not been finalized. For instance, if one spouse is wanting to file a bankruptcy, the bankruptcy courts cannot take checking accounts of the other spouse who has an individual account where the filing spouse has not contributed. Bankruptcy courts can take any jointly owned assets. Divorce courts, on the other hand, may view an individual account as community property if the two have been living together and supporting each other.

What might be more important than whether you can file a bankruptcy during a divorce is how you file for bankruptcy and whether or not you live in a state that is a community property state, whether you have assets, and what bankruptcy you file. These factors may also influence your decision to file separately, as an individual, or jointly.

Divorce proceedings can complicate already complicated bankruptcy laws. It usually is best to file for bankruptcy protection before you file for divorce or after a divorce decree, but if you are already in a divorce situation, it may be advantageous for you to file anyway.

If you are considering bankruptcy, talk to a bankruptcy lawyer. If you need of relief from the stress of debt and you live in or around the metropolitan area of Pittsburgh, Pennsylvania, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

A Legal Problem That Might Come Back to Haunt You

Has your spouse filed for bankruptcy while you were separated or while a divorce was pending? Months or years may pass before you and your spouse finalize living arrangements, but failing to evaluate joint financial debt may come back to haunt you.

This personal bankruptcy story was posted on the internet in March of 2011, “I am currently separated from my cheating soon-to-be-ex-husband. He kicked me out in January 2011, and I now live on my own and he lives in our home. He hasn’t made a mortgage payment nor payment on the second [mortgage] since November 2010. Since he has stopped paying the mortgages, the house is in foreclosure. I have had to come up with a huge security deposit with the utility company so I can have electricity and gas and it’s because of the foreclosure. My credit was perfect up until the foreclosure. Will the banks come after me or garnish my wages as my ex husband has been stating to me in his threatening emails? I’m really worried that creditors will come after me now.”

The debtor in this personal bankruptcy illustration is worried her husband’s creditors may come after her. Although the threats may be ove stated, if the wife’s name is on the mortgage loan, any credit cards, or even the utilities , she could legally be held responsible for paying the bills if her husband defaults. If the creditors file a court case and they are successful in the court proceedings and the couple lives in a state where garnishment of wages is legal, the wife could potentially have her wages garnished.

So can the banks come after her if she is jointly named on any of the debts owed? Yes, they can. They can also garnish her wages, if garnishment is legal in the state in which she resides, and the creditor obtains a court judgment for garnishment. What should she do now to protect herself against these possibilities? First, if she is serious about divorce, she should hire a divorce attorney to help her with any legal questions. Secondly, if she wants to prevent foreclosure, garnishment, or collection activities, she should hire a bankruptcy attorney to investigate whether or not she needs bankruptcy protection.

One of the advantages of filing for bankruptcy protection is the automatic stay. The automatic stay allows a judge to order all collection actions to cease. All types of bankruptcy filings allow an automatic stay which will stop certain lawsuits, foreclosures, utility shut-offs, evictions, repossessions, garnishments, attachments, and debt collection harassment. Following a bankruptcy filing, all creditors will have to go through the United States Bankruptcy Court trustee in order to deal with their debtors.

Like the debtor in our illustration, you may also be in a position where you are separated but continue to have joint financial responsibilities or debts with your spouse. If you are concerned about these debts and you are filing for divorce, seek out a divorce and bankruptcy attorney who can help answer your questions. If you live in or around the metropolitan area of Sacramento, California, contact us today. We will help you find a bankruptcy and/or divorce attorney in your area who can answer your bankruptcy questions

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When You Fail to Tell the Spouse

Bankruptcy is a serious matter that is happening today with too often frequency. According to the National Bankruptcy Center, consumer bankruptcy filings ticked up in February of 2011, but so far the rise has slowed from 2010. Personal bankruptcies have fallen 8% compared to the same time a year ago. The data for this first couple months might indicate consumers won’t have a repeat performance of bankruptcy filings in 2010 where more than 1.6 million bankruptcies were reported, the highest level in five years. What is astonishing about these statistics is the fact more middle-class Americans, people with high incomes, and people with higher education levels are still resorting to bankruptcy filings than ever before. In the midst of all these statistics is the fact that many of these filers are not sharing the bad news with their spouse until it is too late, and they are having to face bankruptcy. So, what happens when you fail to tell the spouse?

This personal bankruptcy story was posted on the internet in March of 2011 as comments in a bankruptcy discussion: “Married 8 years, two Kids, wife was home on Maternity leave in 06. I was mortgage broker. Wife does not handle money stress well at all. Money was tight. I used credit cards and a HELOC to meet bill obligations. Have about $55k in debt wife does not know about. She has recently started her own business and I am self employed as well. I really want to keep her from the stress, but it’s starting to ride on my nerves and conscience…to add fuel the the fire, she thinks there is about $25k in the bank. There is about $11k…How do I tell her about this debt? Should I tell her?I don’t even know how she would react. I sometimes think she would want a divorce.”

The debtor in this personal bankruptcy illustration obviously has failed to tell his wife about their impending financial disaster. He fears his wife might divorce him if she finds out. Believe it or not, this is a rather common thing many men, or women for that matter, do when trying to protect their spouse. They might rationalize what there spouse doesn’t know is not going to hurt them, but if they are truly becoming bankrupt, there is nothing further from the truth.

When you are truly going bankrupt, eventually, you will never be able to keep the fact a secret. The reason is because bankruptcy involves many more people than just a spouse or your family. There is usually more than one creditor when you find yourself in the place of being truly bankrupt, and these creditors have a habit of instigating collection activities when you are late or default on payments you no longer can make. Collection activities can incorporate the use of the U.S. Postal Service, telephone companies, collection agencies, legal counselors, and an assortments of other servers who might be used in the collection process. When these things begin to occur, it is practically impossible to keep them a secret because too many in the community you live already know.

Divorce is often mentioned during bankruptcy matters and listed as a reason a person will file for bankruptcy, especially when that person, as the divorced, loses the primary income maker. There are probably not many statistics kept for those who divorce as a result of a spouse filing bankruptcy, and I suspect the numbers are on the low side. What statistics are available on divorce lists the fact one of the leading causes to divorce is for one spouse or the other failing to be trustworthy. When you have been dishonest in matters, whether it is having an extramarital affair or in finances, it builds mistrust, and it is usually the mistrust that lays the ultimate groundwork for divorce. So, in my opinion, when it comes to finances or extramarital affairs, honesty is always the best policy, and I don’t think it is ever too late to be honest.

One thing is certain when it comes to bankruptcy, bankruptcy laws can be complicated, and common sense indicates you will probably need a bankruptcy lawyer in order to properly understand how these complex laws may apply in your situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan areas of Seattle, Bellevue, or Everett, Washington, contact us today at www.betterbankruptcy.com. We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.