Many people have gotten themselves into a very bad situation financially in today’s economy and find that their only way out is by filing for Bankruptcy. Filing for Bankruptcy today is no longer “taboo” as it was in the past. But what happens to your Dissolution of Marriage action if you or your spouse decides to file for Bankruptcy while in the midst of the proceedings?
11 U.S.C. § 362 states that the filing of protection in Bankruptcy operates as a “stay of proceedings” in the Dissolution action. A “stay of proceedings” is simply a “delay.” In other words, the Court cannot make any rulings or findings in your case until the Bankruptcy is lifted or finalized. Actions taken in violation of the stay are void as in the case of In re Schwartz, 954 F.2d 569.
A Common misconception is that a Bankruptcy filing will simply put a hold on everything. This is not necessarily true. This “delay” does not mean that the Court cannot rule or make any findings regarding support of the child(ren) or your spouse. It also does not apply as to claims of domestic violence, establishment of paternity (if you have a child out of wedlock), and parenting of the child(ren) (residential schedule or parenting plan).
In addition, filing for Bankruptcy may protect you from having the creditors come after you for payment, but that does not mean that upon finalizing the Dissolution, your spouse can not later come after you, asking for reimbursement for payments that he/she had to make on your behalf under the “Hold Harmless” provision. That is why it may be desirable that both you and your spouse (soon to be ex-spouse) file Bankruptcy jointly.
Remember as well that there are different types of Bankruptcy filings and the protection may extend to other areas that may be relevant in your family law matter. Make sure you talk to one of our experienced attorneys here at Tsai Law Company about whether fling for Bankruptcy is in your best interests.