A joint chapter 13 bankruptcy petition has been filed for you and your spouse, and the bankruptcy case has already started the bankruptcy process. Now you and your spouse have filed for a divorce, so what happens to the joint bankruptcy case in this situation? There are a number of options available to handle the chapter 13 bankruptcy that was filed, and the right solution in each case will depend on your individual situation and circumstances.
Divorce can be devastating, and can have a serious impact on the assets and financial resources of the couple. When a divorce is filed during a chapter 13 bankruptcy case there are several options that may be used, and each may have certain advantages and potential drawbacks involved. A qualified bankruptcy lawyer can explain the impact that filing for divorce can have on a joint chapter 13 bankruptcy case, and the options that are available in this type of situation.
A joint chapter 13 bankruptcy petition is considered a single case and file by the bankruptcy court. The case file will include personal information about each spouse in the marriage. Divorce is never easy and is rarely pleasant. Some divorce battles can be very nasty and drag on for extensive periods, as the couple fights over everything and emotions run high. In most cases the couple who are going through a divorce no longer want to be connected in any way, including a joint bankruptcy petition. What does this mean for the previously filed chapter 13 bankruptcy case though?
When a joint chapter 13 bankruptcy is affected by divorce there are several possible options available, and each may be ideal in some situations but a poor choice in others. The attorney who is handling the bankruptcy case may petition the court to withdraw as the legal representative in the case, because the divorce creates a conflict of interest and the bankruptcy lawyer can not effectively represent both parties in the case due to the divorce proceedings. If this occurs then you and your spouse may each need to find an attorney to represent you individually at this point.
Sometimes the bankruptcy court may allow the case to be split, so instead of a joint case there is an individual case for each spouse. This may be difficult if there has not been a divorce property settlement finalized though, because each spouse may not fully know what their assets, income, and debts are until the divorce judge agrees to a specific property settlement. If the case is split up into two individual cases this could mean that you can convert your bankruptcy case to chapter 7 under some circumstances. If your income alone is sufficient to pass the Means Test but the combined marital income put you above the allowable income then you could switch to a chapter 7 bankruptcy filing when your spouse’s income is no longer a factor.
An experienced bankruptcy lawyer can help you understand all of the ways that a divorce can affect your joint chapter 13 bankruptcy case. If you are considering a divorce and you and your spouse have already filed for chapter 13 bankruptcy protection then you may need a new bankruptcy attorney, and you definitely need legal advice in this area so that the right option is chosen for your individual situation and relevant factors.