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Bankruptcy and Divorce in Virginia

BankruptcyDue to hard economic times, more and more parties are considering filing for bankruptcy. Even if you have not contemplated filing yourself, if you are facing the dissolution of your marriage you may find that your spouse has filed. Here are three things to know if you find yourself facing a separation or divorce in Virginia where one spouse has filed for bankruptcy:

  1. Joint Debts. One of the most frequently asked questions when one party files for bankruptcy, either Chapter 7 or Chapter 13, is whether or not the non-filing spouse will be responsible for the discharged debts of the spouse who filed for bankruptcy. The answer is: it depends on how the debts are held. If a discharged debt is one that the filing spouse solely incurred and held solely in their own name, then the non-filing spouse will not be responsible for such debt. However, in cases where a debt is one that was jointly held or jointly incurred, the non-filing spouse can be held responsible. The reason for this is because the filing spouse’s discharge of said debt only applies to them. Any debt for which the parties were jointly and severally liable can still be collected by the creditor. This situation is more likely in a Chapter 7 bankruptcy, where the spouse’s debts are discharged, as opposed to a Chapter 13 bankruptcy, where the moving party sets a plan to repay the debts of the bankruptcy.
  2. Support Obligations Remain. Child support and spousal support obligations are treated differently than other debts when it comes to bankruptcy. These obligations are not dischargeable under Chapter 7 or Chapter 13 fillings. If a person files for bankruptcy and there is an existing child or spousal support obligation, that obligation will remain intact. Meaning, an obligor who files for bankruptcy will still be required to make their monthly support payment during the pendency of the bankruptcy action, and after the bankruptcy. Child or support support arrears also survive bankruptcy—so any back due payments will still be owed.
  3. Filing Bankruptcy Results in Stay. When a person files for bankruptcy, pending collection actions against that person are automatically put on old—this is the “automatic stay.” This stay goes into effect immediately upon the filing and prevents most creditors from continuing collection proceedings. However, much like the exception that allows support obligations to survive bankruptcy, there are exceptions to the stay for the benefit of spouses. Specifically, the following court actions are unaffected by the stay: cases for child support and alimony; the collection of arrears for support; paternity, custody and visitation cases; and any protective order proceedings. However, the circuit court will likely put a hold on any equitable distribution proceeding in a divorce until after the bankruptcy action is concluded.

If you are facing a separation or divorce in Virginia and you or your spouse are also filing for bankruptcy, consult with an experienced divorce attorney as soon as possible. The divorce lawyers at Livesay & Myers, P.C. have years of experience with separation and divorce cases involving bankruptcy in Northern Virginia. Contact us to schedule a consultation today.