The impact of a divorce filing can depend on the type of bankruptcy you filed. If you are in a chapter 7, then the impact is not as great. These bankruptcies in New Jersey are resolved about four months from their filing, and unless issues of equitable distribution are resolved within six months of your bankruptcy case ending, the divorce will most likely not disrupt your bankruptcy or change its outcome.
Problems arise, however, if you are in a chapter 13. This is because you are in an ongoing case that can last anywhere from three to five years based on anticipated income and expense levels. A divorce filed during it can be quite disruptive because
- The income situation changes.
- The goals of the bankruptcy may no longer be reachable.
- New debts can arise for you and your spouse as you hire (and pay for) attorneys to represent you in the divorce action.
As you can see, an unplanned divorce filing can cause some serious problems.
So What Do I Do?
So what do you do if this should happen? Can the bankruptcy be saved, and can the goals it had when it was filed still be met? Well, I have several suggestions depending on your situation and the goals you have for your plan.
- If you are trying to save the marital home and you are not too far away from the completion of the plan, work with your spouse to tough it out until then. Get the mortgage brought current, so that this marital asset can be saved (or some other important goal of the plan is reached).
- If you think the economic disruption from the divorce filing might be short term, you can petition the court to suspend plan payments for a certain number of months (as long as you can meet all other financial obligations, and you can still meet plan goals like saving the home once payments resume).
- Petition the court to modify your repayment plan to reflect your new economic reality post divorce filing.
- Convert to a chapter 7 to discharge your debt and still get a fresh start.
Which option is best for you under your circumstances. But this should be done as soon as possible and in concert with your bankruptcy attorney. Get more information here.
For more discussion of this topic, check out my podcast on Bankruptcy Strategies in Divorce. You can also get more information about bankruptcy and divorce by downloading my free book, Top Questions Divorcing Couples Ask About NJ Bankruptcy.