Many people getting divorced often end up filing bankruptcy. However, often times when one spouse files and the other doesn't, there can be a disconnect between what financial information is disclosed in the divorce, and what is disclosed in the bankruptcy. When this happens, it can lead to the loss of an asset, or even a law suit.
In a family court decision here in Gloucester County, the loss was of the marital residence! The husband filed a chapter 13 bankruptcy during the pendency of his divorce from his wife. The problem came in when he listed his assets.
How It Happened
One part of a bankruptcy petition requires you to disclose ownership in real estate. Here, he answered, "None," estimating the value of his assets at no more than $50,000. However, in the divorce, he listed the house on a Case Information Statement (CIS) as a joint asset with a value of $494,000, and agreed-upon equity of $383,000.
To make matters worse, since chapter 13s can last for years, instead of months with a chapter 7, he did not later amend his bankruptcy petition to list the house.
The family court judge ended up awarding all of the equity in the home to the wife based on the husband's representation in the bankruptcy that he did not own it.
Why It Happened
The important thing to bear in mind here is that if the bankruptcy court and trustee had known about the $383,000 in equity, it would most likely have required him to make a much larger payment to creditors in his plan.
The fact that he benefited greatly from his representation of non-ownership to the bankruptcy court, and that they had accepted it, is what made the family court judge's ruling appropriate under the circumstances. A party to a divorce was trying to be "cute" and play his hand two different ways in two different courts and win in both.
What Do I Do?
If you are getting divorced and are considering bankruptcy, you need to be sure that everything is handled properly to avoid a bad outcome like this.
If you live in southern New Jersey, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.
If you have more questions about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.
If you are looking for more information on how bankruptcy might help you with your divorce, then you should download my free book, Top Questions Divorcing Couples Ask About NJ Bankruptcy.