Filing Bankruptcy After Divorce Is Final
One advantage of filing bankruptcy after the divorce is completed is a shorter divorce than a divorce that proceeds concurrent with bankruptcy. Shorter divorces are generally less expensive.
Recent changes from the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) made it more difficult to discharge divorce-related debts in bankruptcy. You cannot discharge any divorce-related debts through a Chapter 7 bankruptcy.
Bankruptcy and domestic support obligations
In a Chapter 13, the bankruptcy court carefully scrutinizes debts listed for discharge to ensure they are not a domestic support obligation (DSO) of any kind. A Chapter 13 bankruptcy requires individuals to show how they can pay in full a domestic support obligation. According to the BAPCPA, a DSO is a recoverable debt that is in the nature of alimony, maintenance, or support for a spouse, former spouse or child — whether it is expressly designated as such or not. A DSO also includes assistance provided by a governmental unit. The bankruptcy court considers the divorce court’s intention and the parties’ intention when determining an obligation during the divorce case.
However, under the Bankruptcy Code Title 11 USC 523(a)(15), you can discharge a debt that is not a DSO under a Chapter 13, which includes divorce property settlements. The debt must meet these three requirements to qualify as a property settlement debt:
- A debt owed to a spouse, former spouse or the debtor's child
- Not a DSO debt
- Debt incurred during divorce, separation or in connection with a separation agreement, divorce decrees or other court order
It is not always clear how the court may determine whether a debt is a DSO or property settlement. When one spouse pays the other spouse’s attorney fees, the court may view the nature of this debt as a DSO, which makes it a non-dischargeable debt.
If you have questions, consult an experienced bankruptcy attorney about filing bankruptcy after divorce.