The bankruptcy of an ex-spouse can have an impact on a person even after the parties’ divorce is final. However, there are certain items in a person’s divorce decree that bankruptcy will not affect at all. For instance, Section 523(a)(5) of the Bankruptcy Code makes all support obligations non-dischargeable in all types of bankruptcy proceedings. This means that an ex-spouse who files for bankruptcy still has to meet certain financial obligations as ordered by the court, including child support and spousal support obligations.
On the other hand, bankruptcy can make certain portions of a divorce decree unenforceable under California law. For instance, suppose that a man is ordered to pay his ex-wife’s attorney’s fees in their divorce. Instead of paying the fees, however, the man files for bankruptcy. If the ex-wife files an action in the bankruptcy proceeding to challenge the discharge the attorney’s fees, the bankruptcy court will have to determine whether the fees are in the nature of a support obligation or an equitable distribution that can be discharged. The court also could order that the repayment of the fees be restructured in some way.
Likewise, if an ex-spouse was ordered to pay a debt as part of a divorce decree or settlement agreement, and the ex-spouse then files for bankruptcy, he or she may be able to discharge that debt in the bankruptcy. In that case, the ex-spouse no longer will have to pay the debt, and, depending on the circumstances, the debt may fall back on the other ex-spouse, even if the divorce decree says otherwise.
Payment of marital debts and possession of other assets are often hotly-disputed issues in any divorce. The possibility of an ex-spouse’s bankruptcy adds a layer of complexity to these matters that requires legal advice and guidance that only a Los Angeles divorce attorney can properly provide. Contact the Law Offices of Vincent W. Davis & Associates to learn how a California bankruptcy will impact your case.