Keith Mack
When a bankruptcy case is filed, an automatic stay is issued, which prevents the commencement or continuation of most legal actions and collections against the debtor. However, there are exceptions to this stay, including certain family law cases. For instance, cases concerning divorce, child custody, visitation, paternity, and domestic violence are not subject to the automatic stay. This is because bankruptcy laws aim to give debtors a breathing spell from their creditors and prevent the division of property that is part of the bankruptcy estate. Therefore, it is essential to understand the interplay between bankruptcy and family law when determining whether a stay applies.
| Characteristics | Values |
|---|---|
| What is an automatic stay? | A provision that goes into effect immediately upon the filing of any type of bankruptcy proceeding. |
| What does an automatic stay do? | Prohibits the commencement or continuation of most legal proceedings against the debtor or the debtor's property. |
| What happens if the automatic stay is violated? | Violation of the stay can lead to harsh sanctions against creditors and attorneys. |
| What is the intent of the stay? | To give the debtor a break from their creditors, stopping all collection efforts, harassment, and foreclosure actions. |
| What is the stay's duration? | The stay generally remains in effect until the debtor is granted or denied a discharge or until the bankruptcy case is dismissed or closed. |
| Are there exceptions to the automatic stay? | Yes, the federal law excludes a number of family law proceedings from the scope of the stay. |
| What are the exceptions? | Divorce or dissolution of marriage (except when determining the division of property), child custody or visitation, domestic violence, establishing or modifying a domestic support obligation, establishing paternity, etc. |
| What is a domestic support obligation? | Alimony and child support that arise from a court order or separation agreement. |
| What does the automatic stay not prohibit? | Withholding the debtor's income for payment of a domestic support obligation, revoking a debtor's licenses to enforce child support obligations, enforcing a debtor's medical support obligation, etc. |
| What happens if a divorce action seeks to divide property that is part of the bankruptcy estate? | A party may move the Bankruptcy Court to lift the stay if their interests are being harmed. |
What You'll Learn
Divorce and bankruptcy
Pros and Cons of Filing for Bankruptcy Before Divorce
One of the main advantages of filing for bankruptcy before divorce is the cost. By filing jointly, a couple will only have to pay one filing fee and can share the legal fees of a bankruptcy attorney. Additionally, filing for bankruptcy first can simplify the property division process in the divorce, as the bankruptcy process will wipe out qualifying debt, leaving fewer issues for the divorce court to decide.
However, there are also some drawbacks to this approach. If the couple plans to file for Chapter 13 bankruptcy, which involves a three-to-five-year repayment plan, it may be better to wait until after the divorce to avoid prolonging financial ties between the spouses. Additionally, if the couple has a high combined income, they may not qualify for Chapter 7 bankruptcy, and it might be more advantageous for them to file separately after the divorce when their individual incomes are lower.
Bankruptcy and Divorce Proceedings
It is important to note that an automatic stay is triggered when a bankruptcy case is filed, which prevents the commencement or continuation of most legal actions against the debtor. This includes the division of property that is part of the bankruptcy estate. Therefore, if a divorce case is pending when a bankruptcy is filed, it is generally advisable to seek relief from the bankruptcy stay before proceeding with the divorce.
However, there are exceptions to the automatic stay that specifically relate to domestic matters. These include:
- Establishing paternity
- Establishing or modifying a domestic support obligation
- Child custody or visitation issues
- Dissolution of marriage, as long as it does not involve determining the division of property
- Domestic violence issues
Filing for Bankruptcy After Divorce
Some people choose to file for divorce first and then file for bankruptcy after it has been finalised. This approach may be beneficial if one spouse needs immediate bankruptcy protection or if the debts that need to be discharged are owed by only one spouse. Filing for bankruptcy after divorce can also be advantageous if the couple cannot get along, as it allows them to seek a discharge of their debts independently.
Additionally, if the couple's combined income is too high to qualify for Chapter 7 bankruptcy, they may want to wait until after the divorce to file separately, as their individual incomes may be low enough to qualify.
Key Considerations
When deciding whether to file for bankruptcy before or after divorce, it is essential to consider factors such as the amount of debt and property involved, the type of bankruptcy to be filed, and the income of both spouses. Seeking legal advice is crucial, as divorce and bankruptcy can have serious and long-lasting consequences.
Employment Discrimination Laws: Do They Cover All Companies?
You may want to see also
Child support and bankruptcy
Child Support Obligations and Bankruptcy
Child support payments are non-dischargeable, meaning they cannot be eliminated through bankruptcy. This is because both parents have a legal responsibility to financially support their children. Even if a parent files for bankruptcy, they are still required to fulfil their child support obligations. The bankruptcy court will uphold the child support order, and the non-custodial parent must continue making payments.
Automatic Stay and Child Support
Automatic stay is a provision that comes into effect when a bankruptcy case is filed. It prevents creditors from pursuing most legal actions and collections against the debtor. However, the automatic stay does not apply to child support obligations. Wage garnishments for child support will continue, and the court and state department of social services can intervene to enforce child support responsibilities if the non-custodial parent stops paying.
Chapter 7 and Chapter 13 Bankruptcies
There are two common types of bankruptcy that individuals may file: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is for individuals who meet certain income requirements, and it grants forgiveness for unsecured debts. Chapter 13 bankruptcy is for individuals who earn too much income to qualify for Chapter 7 and requires them to repay a portion of their debt.
In a Chapter 7 bankruptcy, any income earned after filing is not considered part of the bankruptcy estate and can be used to fulfil child support obligations. The automatic stay in Chapter 7 does not prevent actions to establish or modify child support orders.
In a Chapter 13 bankruptcy, any income earned is considered part of the bankruptcy estate. However, child support claims take priority over other debts, such as taxes and unsecured obligations. The debtor must include a specific payment plan for child support arrears in their repayment plan, and these claims must be paid in full.
Seeking Legal Advice
The intersection of family law and bankruptcy can be complex, and it is important to understand your rights and obligations. If you are facing financial difficulties and are concerned about fulfilling your child support obligations, it is recommended to seek legal advice from a qualified bankruptcy lawyer. They can help you navigate the specific laws and exceptions in your state and guide you towards the best course of action for your situation.
Tennessee Maternity Laws: Who is Bound by Them?
You may want to see also
Child custody and bankruptcy
When a bankruptcy case is filed, an automatic stay is issued, which prevents the continuation or commencement of most legal actions and collections against the debtor. However, this automatic stay does not apply to family law cases concerning child custody or visitation. This means that child custody arrangements will remain unaffected by bankruptcy filings, and the involved parent will still need to make child support payments.
In bankruptcy, debts are divided into two categories: dischargeable debt, which can be eliminated, and nondischargeable debt, which the debtor must still pay. Child support is considered nondischargeable in both Chapter 7 and Chapter 13 bankruptcy filings and is also considered a "priority debt", meaning it is one of the first debts to be repaid to creditors. Alimony, or spousal support, is also considered nondischargeable.
In Chapter 7 cases, post-filing earnings are not considered part of the bankruptcy estate, so the automatic stay has no effect on domestic support payments. This means that, in Chapter 7, debtors can be sued if they fall behind on child support payments. For Chapter 13 debtors, the automatic stay offers more protection, as post-filing earnings are considered part of the bankruptcy estate, and creditors would need to file a motion to lift the stay before pursuing the debtor for child support. However, debtors must continue to make full and timely payments as provided by their repayment plan to keep this protection.
When it comes to child custody, bankruptcy generally should not impact the terms of the arrangement. Family courts prioritize finding an arrangement that will provide the best possible quality of life for the child. However, if financial insolvency interferes with a parent's ability to provide for their children, the court may determine that the other parent can offer a more stable home environment. Therefore, while bankruptcy itself will not directly impact child custody arrangements, it could indirectly influence the court's decision if it affects a parent's ability to financially support their children.
Understanding Texas Escheatment Laws: Who Do They Affect?
You may want to see also
Bankruptcy and domestic violence
In the United States, bankruptcy filings automatically stay most legal proceedings against the debtor. However, there are exceptions for certain family law proceedings, including those regarding domestic violence. This means that victims of domestic violence can still take legal action against their abusers, even if the abuser has filed for bankruptcy.
Additionally, bankruptcy can be a resource for domestic violence victims to obtain relief from debts incurred during the abusive relationship. For example, a victim may have been coerced into taking out loans or running up debt in their name by their abuser. Filing for bankruptcy can help them eliminate these debts and gain a fresh start.
On the other hand, individuals accused of domestic violence may also benefit from bankruptcy. Accusations are often made during stressful times in a relationship, and financial crises can contribute to this stress. By dealing with debt through bankruptcy, individuals may be able to reduce the risk of domestic violence.
Furthermore, bankruptcy can provide a means for accused individuals to manage financial penalties imposed for a domestic violence crime. While criminal court fines cannot be discharged in bankruptcy, a bankruptcy lawyer may suggest using a credit card to pay these fines and then discharging the credit card debt.
Overall, bankruptcy can be a complex issue, especially when it intersects with family law and domestic violence. It is important for individuals to understand their rights and options in such situations, and seeking legal advice is crucial.
HIPAA Laws: Do Animals Fall Under Patient Privacy Laws?
You may want to see also
Bankruptcy and paternity
When a bankruptcy case is filed, an automatic stay is issued, which prevents the continuation or commencement of most legal actions and collections against the debtor. However, there are exceptions to the automatic stay, including family law proceedings.
The automatic stay does not apply to proceedings to establish paternity. This means that a party can proceed with establishing paternity despite the other party's bankruptcy filing. This is one of several exceptions specifically tied to domestic matters, which also include:
- Establishing or modifying an order for a domestic support obligation
- Child custody or visitation
- Dissolution of marriage, as long as it does not involve determining the division of property of the estate
- Domestic violence
These exceptions allow for action against a debtor for an order related to the above matters without seeking relief from the bankruptcy court. They give creditors the ability to collect against a debtor for "domestic support obligations" even after bankruptcy is filed. This means that the debt can be collected from the debtor's post-petition wages and certain other non-estate property.
Child Support and Bankruptcy
While bankruptcy may provide relief from certain debts, it does not alleviate any child support obligations imposed by a mutual agreement or court order. Bankruptcy does not extinguish child support obligations, and child support debt is considered a priority debt that must be paid in full and is not dischargeable in bankruptcy.
In a Chapter 7 bankruptcy, there is an automatic stay that prevents anyone from pursuing claims against the debtor. However, this stay does not prevent actions to establish or seek past-due child support. Any income earned after filing for bankruptcy can be considered in determining child support obligations and can be used to pay child support arrearages.
In a Chapter 13 bankruptcy, any income earned is considered part of the bankruptcy estate, and a party seeking to impose a support obligation must request relief from the stay. If the debtor is already subject to a child support order and fails to make payments, the court will usually lift the stay to allow for the recovery of support.
Exploring Torah Law: Who Does It Apply To?
You may want to see also
Frequently asked questions
It depends. While a bankruptcy stay prevents the continuation or commencement of most legal actions and collections against the debtor, there are exceptions. Family law cases can proceed without seeking relief from the stay if they involve:
- Establishing paternity
- Establishing or modifying an order for a domestic support obligation
- Child custody or visitation
- Dissolution of marriage, as long as it does not determine the division of property of the estate
- Domestic violence
A bankruptcy stay is an automatic injunction that goes into effect when an individual files for bankruptcy. It prevents creditors from taking any action to collect on a debt, such as initiating or continuing lawsuits, wage garnishments, or telephone calls demanding payments.
The intent of a bankruptcy stay is to give the debtor a "breathing spell" from creditors. It allows the debtor to attempt a repayment or reorganization or simply to be relieved of the financial pressures that led to the bankruptcy.
A bankruptcy stay can have a significant impact on family law cases, depending on the specific circumstances. If a divorce case is pending when a bankruptcy is filed, it is generally best to seek relief from the bankruptcy stay before proceeding to final judgment. This is because the bankruptcy stay prohibits proceedings to divide or split up property of the bankruptcy estate.
To lift a bankruptcy stay in a family law case, you need to request relief from the bankruptcy court. This involves demonstrating cause, or the reason why the stay needs to be lifted immediately. It is important to note that the standards for lifting a stay vary by jurisdiction.
