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Many clients these days are concerned with how a bankruptcy proceeding will impact a divorce case. Sometimes it can be both parties who are or will, in the future, contemplate this action as a way of reducing debt. In many cases, it can actually help both parties who find themselves in a position with little assets and huge financial obligations, resolve the issues between them. Careful thought should be given to the timing of this compared to the divorce proceeding.
However, sometimes, one spouse may use this bankruptcy as a method to gain an upper hand over the other spouse. Of course, this situation needs to be properly addressed in all divorce settlement negotiations. While some obligations will never be affected by this, others can if not properly protected. It is clear that all child support obligations can never be discharged in bankruptcy, and courts have upheld that decesion over and over.
Other debts that one party takes on, either by consent or by ruling should be protected from discharge in this way. Recently, a client reached an agreement that the credit cards in joint name would be paid by the other spouse. After the divorce was finalized, that spouse filed for bankrupcty, listing those credit card obligations as dischargeable debts. However, the divorce judgment was clear in that settlement provision that this obligation could not be discharged by any bankruptcy proceeding. He was held at a post judgement motion to be responsible for the debt based on his contractual agreement, and not be any allowable discharge through another court.
If you are involved in a divorce action and need answers to your financial questions, or are concerned as to your protection, consult with a lawyer at the Law Office of Eugene Lumberg and Eric S. Lumberg.
We offer a free consultation and handle cases in all family courts.
Call today for your free consultation.