SOME BANKRUPTCY AND FAMILY LAW CROSS-OVER ISSUES:
1. The automatic stay/injunction issue.
When a bankruptcy petition is filed, an "automatic stay" is issued. When a divorce petition is filed, an automatic "injunction" is issued. When both a bankruptcy and divorce petition are filed, both a stay and injunction are issued. The bankruptcy stay does not halt child support or child custody proceedings, but may halt certain types of collection efforts to enforce support. Permission may need to be obtained from the bankruptcy judge to employ certain types of collection efforts used to collect support. Also, the family law court may not divide assets or debts until the bankruptcy case is closed or until the permission of the bankruptcy court is obtained. The bankruptcy stay does not prevent the filing of a Petition for divorce, and does not preclude the family court from entering a status judgment of divorce. Likewise, the divorce injunction does not prohibit any party from filing for bankruptcy.
2. The discharge issue.
A bankruptcy discharge in a Chapter 7 case will not discharge any debts distributed in a divorce decree. However, a Chapter 13 case will discharge such debts. If a Chapter 7 bankruptcy discharge is granted as to one spouse before a divorce decree is issued, then there is a legal question whether the Family Court judge has the authority to redistribute the discharged debts to the spouse who obtained the bankruptcy discharge.
The Law Office of Robert McCoy has been practicing family law for over 14 years, and has handled several complex cases involving multiple businesses, properties and interstate issues. The Law Office handles bankruptcy-divorce crossovers, and Robert McCoy is a recognized expert in these types of cases. Robert McCoy is an instructor for Sterling Education Services and teaches other attorneys how to handle divorce-bankruptcy cross-overs.