Divorce and BankruptcyIn the past year, Georgian families have contacted our office to speak to a bankruptcy attorney about the legal options available to families who, due to the recent economic crisis, are having trouble meeting their monthly debt obligations. These families and individuals may benefit from filing for bankruptcy because doing so can greatly help reduce or eliminate many common forms of debt such as credit card debt and medical bills.

Many people make a New Year’s resolution to get out of debt, and this goal is a great one to have, and it is one that bankruptcy may help you achieve. However, there are often other life changing events such as divorce, deployment, or death that can affect a bankruptcy case in very serious and possibly unexpected ways. Read on to learn more about how the decision to file for divorce may affect your Chapter 13 case.

Divorce in Chapter 13

Chapter 13 bankruptcy is very different from Chapter 7 bankruptcy. In a Chapter 13 case, the debtor works out a payment plan with his/her creditors in order to pay them as much of what is owed to them as possible. At the conclusion of the plan period, the remaining debt is discharged by the bankruptcy court.

The aforementioned plan period usually lasts between three to five years. This may seem like a short period of time but in reality, a whole number of life changing events can happen during this span, including a divorce. If you and your spouse begin divorce proceedings after your Chapter 13 case has been filed, then your bankruptcy attorney may have to withdraw from the case. The reason for this is because your attorney represents both of your interests, but now that you are seeking a divorcee, your interests will likely no longer be the same and will probably conflict with each. Ethical rules and professional regulations prohibit attorneys from representing clients with conflicting interests.

If your attorney must withdraw, you should easily be able to replace him/her with a new attorney by discussing this procedure with the court.

Making the Chapter 13 Payments During a Divorce

Since a divorce often means the spouses no longer share a household and financial resources, it may be difficult to continue making the Chapter 13 payments. However, it is absolutely critical that you continue making the payments to the best of your ability. If you are not able to do so, you may be eligible to convert your Chapter 13 case to a Chapter 7. Conversion is not automatic and not everyone is eligible for this benefit but if you are having trouble making the plan payments you are encouraged to discuss this option with your attorney as soon as possible. Chapter 7 has its benefits but it also has its disadvantages such as the loss of property including a house or car.

Additionally, there is also the option to ask the court to modify (lower) your plan payments if the divorce leaves you with less financial resources. To do so, your attorney would file a motion with the court and provide evidence of the significant change in your financial circumstances.

Splitting a Bankruptcy Case

Another option is to ask the court to split up your and your spouse’s joint bankruptcy case into two separate cases. The legal term for this action is called bifurcation. Once the original case has been bifurcated, it is up to each spouse to decide what to do (convert to Chapter 7, motion for modified payments, etc.)

Contact our office today at 404-913-1529 to speak to an experienced attorney about your case. We look forward to speaking with you!