Bankruptcy and Divorce - Divorce Source

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Bankruptcy and Divorce

The Most Common Types of Bankruptcy

Chapter 7: Trustee liquidates debtor's nonexempt assets to pay creditors, most consumer cases involve no nonexempt assets and are closed within 6 months with no payments to creditors, certain debts may be excepted from the bankruptcy discharge, including spousal support and, under certain circumstances, other divorce-related debts.
Chapter 13: Repayment plan available only to individuals, trustee collects payments and disburses to creditors, plan usually lasts from 3 to 5 years, debtor must pay secured and priority claims in full but need not pay unsecured claims in full as long as debtor contributes all disposable income to plan and creditor receives at least as much as creditor would receive in a chapter 7 case, certain debts are excepted from the discharge, including support claims but not other divorce-related debts.

What you need to know:

Jurisdiction of Bankruptcy Court Set Forth in 28 U.S.C. 1334(a) and (b): Bankruptcy court has nonexclusive jurisdiction over (1) all civil disputes based on bankruptcy law, (2) all civil disputes based on non-bankruptcy law but arising in a bankruptcy case...
Automatic Stay: When a bankruptcy petition is filed, a stay automatically goes into effect of all actions by creditors to collect pre-petition debts or to exercise control over property of the estate
Nondischargeable Family Law Debts: Section 523(a)(5) of the Bankruptcy Code provides that the following type of debt is not dischargeable in a chapter 7 case...
Property of the Estate: When a bankruptcy case is filed, an estate is created. Property of the estate is protected by the automatic stay....

Community Property: All interest of the debtor and the debtor's spouse in community property as of the commencement of the case that is
Pensions: (1) Except as provided in paragraph (2) of this subsection, an interest of the debtor in property becomes property of the estate under subsection...

Avoidance of Liens Security Debts Incurred in Divorce Proceeding: Notwithstanding any waiver of exemptions but subject to paragraph (3), the debtor may avoid the fixing of a lien on an interest of the debtor in property...

Judgment Liens Securing Support Awards: The substance of 522(f)(1)(A), qualifying the phrase "a judicial lien" was added by the Bankruptcy Reform Act of 1994. As a result of this provision, a judicial lien...
Judgment Liens Securing Nonsupport Family Law Obligations: If a judgment lien on the debtor's homestead secures a nonsupport obligation e.g., a property settlement obligation, whether the lien may be avoided under...
Family Law Obligations Secured by Consensual Liens: Before Farrey v. Sanderfoot gave protection from avoidance to most family law judgment liens, some family law practitioners may have obtained deeds of trust to secure their clients' obligations...