Whenever a bankruptcy is filed, something called an automatic stay is imposed. This protects the debtor in bankruptcy from creditors. But what if the individual debtor is in the middle of a divorce? What happens? Well, that depends.
Bankruptcies seek to protect the debtor’s assets (called “assets of the estate”) from creditors while the debtor is in bankruptcy and, in most cases, after the case is over.
You Can Start Something
However, the bankruptcy code does allow for family law and divorce matters to continue during the bankruptcy itself, and does not prevent actions commenced:
- To establish paternity
- To establish or modify an order for alimony, child support, or some other domestic support obligation
- To determine child custody or visitation
- For the dissolution of marriage, except for the equitable distribution of marital property
- For domestic violence
Or Continue Something
Even matters already in progress can be continued for enforcement purposes, including:
- The collection of alimony, child support or some other domestic support obligation from property other than that of the bankrupt estate
- The withholding of income (such as through a wage attachment) for the collection of a domestic support obligation
- The withholding, suspension, or restriction of a driver’s license, professional or occupational license, or recreational license; or
- The interception of a tax refund
The only issue that cannot be litigated during the pendency of a bankruptcy is the equitable distribution of marital assets.
As a practical matter, however, most family law judges in New Jersey will stay the divorce proceedings until the bankruptcy is concluded due to the interrelated nature of all the issues. For a chapter 7 bankruptcy, though, the wait is not long – in most cases no more than three to four months.
So What Do I Do?
No one case is the same. So if you live in southern New Jersey, are in the midst of a divorce, and you, your spouse, or both of you are considering bankruptcy, please feel free to call me at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your situation in detail to be sure your rights are protected.
If you have more questions about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey or Top Questions Divorcing Couples Ask About NJ Bankruptcy.