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What Happens If My Spouse and I Get a Divorce During Chapter 13 Bankruptcy?

For many debtors, Chapter 13 bankruptcy is truly the most effective way to find lasting debt relief. But in the three to five years it takes to work your way through a Chapter 13 repayment plan, your financial situation may change, whether you get married, switch jobs or - as many folks unfortunately do - go through a divorce.

If you filed for Chapter 13 with a spouse, a divorce will obviously shake things up. But it doesn’t have to derail your debt relief plan. With over half of marriages ending in divorce, experienced bankruptcy attorneys have helped guide many divorcing spouses through their bankruptcy cases. If you’re ending a marriage during your bankruptcy, you have several options to obtain your bankruptcy discharge.

Consult with Your Attorney

First and foremost, talk to your bankruptcy attorney. He or she will help you determine the best solution for your particular situation. Because representing both you and your now-ex can present a conflict of interest, your attorney will also determine whether withdrawing and recommending another lawyer is the right choice.

Option 1: Keep Making Payments

Just because you are getting divorced doesn’t mean you have to change your payment plan. If you can afford to continue making regular payments, by all means, you should continue to do so. Unfortunately, you may find that you and your ex disagree on how to divvy up payments. Additionally, the new financial strain of supporting two separate households can make it increasingly difficult to afford your current payment plan.

Option 2: Convert to Chapter 7

Did you file for Chapter 13 bankruptcy because you originally earned too much disposable income to qualify for Chapter 7? Your new financial situation may make you eligible for a Chapter 7 bankruptcy plan. Unlike Chapter 13, Chapter 7 bankruptcy offers the ability to discharge most unsecured debts entirely, often in just a few months. However, Chapter 7 isn’t the best choice for everyone. If you filed for bankruptcy because you wanted to stop foreclosure or protect your car from repossession, it may be safer to stick with Chapter 13.

Option 3: Modify Your Plan

If you are unable or unwilling to convert your plan to a Chapter 7, it may still be possible to complete your Chapter 13 bankruptcy by lowering your repayments. In certain cases such as divorce, filing a motion with the bankruptcy court can reduce Chapter 13 plan payments.

Option 4: Separate Your Bankruptcy

One more option is to petition the bankruptcy court to separate – or “bifurcate” – your bankruptcy plan. Bifurcation creates separate bankruptcy plans for you and your ex-spouse, allowing you each to decide how to proceed with your bankruptcy.

Divorce isn’t pleasant, but it’s a fact of life – and it doesn’t have to cost you your bankruptcy case. Because divorce leads to financial hardship in many cases (at least in the short term) the protective benefits of bankruptcy can become even more valuable during this time.

If you’re considering a divorce during bankruptcy – or are considering filing for bankruptcy during a divorce – take the time to schedule an appointment with a knowledgeable bankruptcy attorney. At DebtStoppers, our bankruptcy lawyers are experts at identifying the most advantageous debt relief strategy for you and your family, no matter what your circumstances.

Resources:

Divorce During Chapter 13 Bankruptcy: Nolo.com

Divorce During Chapter 13 Bankruptcy? By Justin Harelik, Bankrate.com

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