Chapter 13 Bankruptcy, commonly called a wage earner's plan, enables individuals with regular income to develop a plan to repay all or part of their unsecured debts over three or five years. You can file a Chapter 13 Bankruptcy jointly with a spouse, or you can file it as an individual.
The answer to the debtor's question depends on a couple of factors. In Chapter 13 bankruptcy, whether you file before the final divorce decree or after the final divorce decree is very important. The debtor does not say whether or not the bankruptcy has already been filed. If it is after the bankruptcy has been filed, an individual or couple has fewer options for implementing the plan, and a divorce decree could affect the ongoing payments of the plan.
The debtor also does not say whether the bankruptcy is being filed individually or jointly. If the bankruptcy has been filed before the divorce decree, a joint filing in a Chapter 13 plan could possibly stand a better chance of surviving the orders of the divorce court. If the filing has occurred by an individual spouse before the divorce decree, the complications presented by the divorce decree could frustrate completing the plan.
It is hard to complete a Chapter 13 Bankruptcy plan even as a married couple. Some 60% of Chapter 13 Bankruptcy cases are dismissed because clients fall behind on their payments. Ideally, the Chapter 13 Bankruptcy plan should be made after a divorce decree so that your discharged debts will not violate a court order of the divorce court.
When you file Chapter 13 bankruptcy after a divorce decree, you have to file as an individual. Only married individuals can file a Chapter 13 jointly. If you filed jointly before the divorce decree was final, you can complete the plan if you and your ex-spouse can agree on how to distribute the payments.
Divorce and Bankruptcy are two separate disciplines of the law, and when they occur simultaneously, each can tend to complicate the process of the other. That is why it is highly recommended you consult with both a bankruptcy and a divorce lawyer or a lawyer who specializes in both disciplines before you file for bankruptcy.
Filing for divorce while in a bankruptcy is something that can be done. The proper procedures must be followed, though. The first thing that needs to be done is to have a Motion to Lift the Automatic Stay to Permit Divorce filed with the court. An order on this motion removes the Automatic Stay only to the extent that allows the debtor to proceed with the divorce. This must be done because the automatic stay prevents any court action while in a bankruptcy.
Since filing your Chapter 13 bankruptcy, a stay has been put into place and now it must be lifted in order for a divorce to proceed. As a Debtor, you must contact your bankruptcy attorney to find out what fees they charge for filing this motion. Your bankruptcy attorney may have different fees if it is uncontested or contested, so make sure the other Debtor in the case is willing to move forward, it will save you both a lot of money, time and grief. Once the stay has been lifted, you can now move forward in filing for divorce. Please contact your bankruptcy attorney as soon as you know you have to go this route, to ensure enough time is allowed to permit the motion to lift the automatic stay to permit the divorce.
Where the bankruptcy comes in is both people are responsible for the debts no matter what the judge says. Example of this the car is in both names the husband is going to keep it but for whatever reason he falls behind and the car is reposed. The creditor is going to go after both people no matter what the judge has said. The husband could have used the chapter 13 bankruptcy to put the car, all the credit cards and surrender the wife car in the plan. In doing this the payment could be less then what the car alone was. The wife could do the chapter 7 bankruptcy surrendering his car and the credit cards. Now both people will not be responsible for what the other person does in the future, allowing them to rebuild their credit. If a divorce is in your future a bankruptcy attorney should be talked to see how the bankruptcy laws could help.
If you Divorce while in active Chapter 13 case then you may decide not to remain in current bankruptcy case with spouse. You can sever your final financial ties after divorce by filing a Motion to Sever Chapter 13 bankruptcy case. It is best if both parties are in agreement for one debtor remain in current case and the ex-spouse can refile a new case. This would be an unopposed motion and your attorney will have you sign an affidavit to reflect the agreement to sever. However, if you are a debtor in active bankruptcy and your ex-spouse refuses to contribute to the bankruptcy payment then you can still have the case severed. An intent to file motion to sever letter will be sent to opposing debtor via certified. If they do not contact our office to object then our office can proceed with filing and serving opposing debtor notice of hearing and objection deadline. If the opposing debtor does not contact our office to object then the Motion to Sever will be granted.