What Happens in Chapter 13 When You Get Divorced?

Going through bankruptcy is not exactly a pleasant experience. Neither is getting a divorce. Unfortunately, some people end up going through both at the same time. While these are technically separate legal proceedings, your divorce could have implications for your Chapter 13 bankruptcy case, and you should talk to your attorney about it immediately.

Chapter 13 bankruptcy is more common in cases where people have a steady income and assets they wish to protect. Generally, people do not lose assets or property if they keep up with a court-approved payment plan. However, the process is long, and some people end up filing for divorce while their bankruptcy case is pending. Divorce can have significant financial ramifications, and your bankruptcy case might be affected. An attorney can help you sever your bankruptcy case from your spouse’s if you filed it jointly. If you can no longer afford your payment plan, your lawyer can help you have it adjusted. In some cases, you might be able to completely change your bankruptcy case to a different chapter.

Call (215) 701-6519 and speak to our bankruptcy attorneys with Young, Marr, Mallis & Associates about a free, confidential case evaluation.

How Getting Divorced Might Affect Your Chapter 13 Bankruptcy Case

Bankruptcy and divorce have a lot in common. They are often unpleasant to go through when they are happening, but you are in a better position to rebuild your life once they are over. However, if your divorce and bankruptcy case overlap, your situation might be a bit more legally complex.

Changes in Your Finances

It is not uncommon for people to begin Chapter 13 bankruptcy proceedings and then file for divorce shortly after. Chapter 13 bankruptcy often takes a few years to complete, and people sometimes go through a divorce while their bankruptcy case is still pending. Since divorce often impacts finances, it might also impact your bankruptcy proceedings.

Bankruptcy proceedings are often dependent on your income, assets, and properties. Our bankruptcy attorneys must provide an accurate accounting of your finances to the court when we file your bankruptcy petition. If you file for divorce after filing for bankruptcy, your assets and finances might change. Your former spouse might take certain assets or accounts with them, essentially removing them from your bankruptcy case. If that happens, we must make sure the court knows what is going on, and we must provide updated information about your assets after the divorce.

Your Payment Plan

Many people prefer Chapter 13 because it does not involve liquidating assets or properties. Instead, petitioners must develop aggressive yet feasible payment plans that the court must approve. They typically remain on the plan for about 3 to 5 years to bring their finances and debts back under control.

If. After your divorce, you owe alimony and child support, you might be unable to keep up with your payment plan. If that happens, speak to your attorney immediately. Courts are often willing to work with Chapter 13 bankruptcy petitioners who experience unexpected changes in their finances. Your payment plan may be adjusted to account for your new expenses, as long as the court and creditors approve.

Filing Jointly or Individually

A major consideration in this situation is whether you filed for bankruptcy individually or jointly with your former spouse. If you filed individually, your bankruptcy case is yours only, and not much has to change, depending on how the divorce affects your finances. However, if you filed for bankruptcy jointly with your spouse, you might need to separate your finances and bankruptcy cases.

This is not an unusual situation, and courts are prepared to deal with situations like this. One possibility is that you and your spouse can sever the case. Instead of just one bankruptcy case for a married couple, the case would be split into two cases, and your spouse’s assets, accounts, and finances would be removed from your bankruptcy case.

Debts and income would need to be reallocated. You might end up responsible for a larger or smaller share of the debt. Alternatively, a couple getting divorced might agree to split everything right down the middle. After reallocation, you will almost certainly need to adjust your payment plan. Since the case is severed, the old payment plan will likely be thrown own, and each former spouse would need to develop their own payment plan.

What to Do if You Get Divorced in the Middle of Chapter 13 Bankruptcy

If you end up going through a divorce after you file for Chapter 13 bankruptcy, speak to your attorney about what steps to take to protect the interests of your bankruptcy case. You might have to make very few changes, but there is also a chance that some big changes must be made.

Continue Making Payments

Divorce can take a long time, and it might not even be finalized until after your bankruptcy case is complete. If you do not anticipate any major changes to your financial situation while your divorce is pending, you should continue making payments on your Chapter 13 payment plan. However, if the divorce moves quickly and your finances are changed before your bankruptcy case is over, tell your attorney about everything immediately.

Sever or Bifurcate Your Case

As mentioned before, when a married couple files jointly for Chapter 13 bankruptcy, they can sever the case if they file for divorce. Did you file jointly? If you did not, there is nothing to sever. If you did file jointly, your lawyer can help you file a motion to sever. This would divide the case in two, allowing you and your former spouse to handle the bankruptcy process individually rather than together. However, this is not required. You and your spouse can choose to handle the bankruptcy process together and part ways after it is finished.

Convert to Another Chapter

People often file for Chapter 13 because they have enough income to keep up with their payment plan. This expendable income often makes people ineligible for Chapter 7 bankruptcy, which is often completed much faster than Chapter 13. If your income changes after the divorce because of court-ordered child support or alimony, you might now qualify for Chapter 7. If you are not worried about protecting assets or property, converting your case to Chapter 7 might help you get through the bankruptcy process faster.

Call Our Bankruptcy Lawyers for Assistance with Your Case Today

Call (215) 701-6519 and speak to our chapter 13 bankruptcy attorneys with Young, Marr, Mallis & Associates about a free, confidential case evaluation.