Automatic Stays in Divorce-Related Bankruptcy

Apart from the massive psychological and emotional toll that a divorce can take on either spouse, issues of property division and finances compound the stress of an already-difficult situation. A thorough investigation of the potential benefits and drawbacks of filing for bankruptcy makes sense for many people facing dire economic straits in the wake of a divorce.

One of the more important components of a bankruptcy case, especially as it pertains to divorce settlements, is the automatic stay. This is the statute mandating that collection of most, if not all, debts owed by the filer is immediately halted. Even before a creditor or other party suing for debts gets word of the bankruptcy, the stay goes into effect.

Sweeping as it is, there are several important exceptions to the automatic stay in how it pertains to divorce. First of all, the collection of child support or alimony is not affected by a stay. If, for example, your former spouse files for bankruptcy, he or she is still under some obligation to pay any court-ordered amount, even if it is delayed by the proceedings.

A key difference here has to do with Chapter 7 versus Chapter 13 bankruptcy rules. Anything earned by someone filing for the former does not count as part his or her estate, and is thus able to be collected for support. On the other hand, Chapter 13 considers post-petition earnings as part of the person’s property, and thus off-limits for collection.

Contact Us

For more information on automatic stays and any other questions you might have concerning bankruptcy and divorce, contact the experienced team of Austin divorce lawyers at the law offices of Slater, Kennon & Pugh Ltd.LLP. today by calling 512-472-2431.