The Automatic Stay in Bankruptcy and Divorce

Parties involved in a dissolution are frequently concerned that the other party will either stall the divorce proceeding through bankruptcy or use bankruptcy to avoid payment obligations. Fortunately, neither is possible since changes in bankruptcy law in 2005.

When a person files a petition for bankruptcy, the law imposes an “automatic stay” that prevents creditors from pursuing collection actions. However, the automatic stay does not apply to the establishment or modification of parenting plans or visitation, domestic violence proceedings, the establishment or modification of child support or maintenance, the establishment of paternity, or even an action for marriage dissolution other than those having issues regarding property division.

Once established, child support orders and maintenance provisions may not be discharged in bankruptcy. In fact, since 2005, the distinction between orders providing for division of property and orders providing for support of a spouse or child has been eliminated. This means that nearly all obligations to a spouse, former spouse, or child of the debtor are not discharged by bankruptcy.

Additionally, domestic support obligations--child support and maintenance obligations--now have priority ahead of other unsecured creditors.

For more information, contact us to schedule a consultation.

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