Bankruptcy and marital debt

If you are going through a divorce or separation you need to read this post. Bankruptcy may not discharge debts assigned by a family court Judge. If you are about to be sued for alimony or property distribution the last thing you may want to do is seek bankruptcy protection before those issues are resolved.

Alimony is based on the financial need of one spouse and the ability of the other to pay. Filing Chapter 7 or 13 may erase your obligation to Visa only to free up money to pay your Ex. Alimony like child support is a domestic support obligation and is non-dischargeable. Extra debt actually helps in family Court. The dependent spouse can argue the need for more money to pay debts, and the supporting spouse can argue they have no extra money to pay alimony.

The same rationale against filing Chapter 7 or Chapter 13 before an alimony case applies in an equitable distribution case. If you become debt free in bankruptcy court, a family court judge can assign martial debt right back to you in family court. Even if you have not been sued by your ex, you may give up valuable leverage by filing bankruptcy before resolving the martial issues.

A final cautionary tale is the angry ex-spouse who attends your bankruptcy meeting to tell the trustee everything you didn’t disclose on your bankruptcy petition such as that hidden bank account, boat, or transfer of assets. The bankruptcy trustee has no better source of inside information than your angry ex. That exact scenario has resulted in discharges being revoked and potential criminal charges for the exposed debtor.