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The Effects of Bankruptcy During Divorce (PDF Download Version)
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Manual I, 8 of the United States Constitution authorizes Congress to establish "uniform Laws of the subject of bankruptcies throughout the United States." That power includes all aspects of the distribution of a debtor's property and the discharge of the debtor's debts. In re Klein, 42 U.S. 277 (1843).

Whenever a debtor files a bankruptcy case, an automatic stay is imposed. The automatic stay is a statutory, ex parte, temporary restraining order against the world: It stays the commencement or continuation of any state or federal litigation, including appeals against the debtor, including those for claims exempted from discharge, based on a cause of action which arose prior to the filing of the bankruptcy, other than those specifically exempted by statute. 11 U.S.C. 362(a) (1998). The automatic stay precludes any action to collect a debt or enforce a judgment against the debtor, 11 U.S.C. 362(a)(2), (6), any action to create, enforce, or perfect a lien against the debtor's property, 11 U.S.C. 362(a)(4), (5), any action to obtain possession of or control over the debtor's property, 11 U.S.C. 362(a)(3), or any action to set off a debt owing to the debtor. 11 U.S.C. 362(a)(7). The purpose of the automatic stay "is to give the debtor a breathing spell from his creditors, in which he may attempt a repayment or reorganization plan. The automatic stay also protects creditors by averting a scramble for assets and promoting instead an orderly liquidation procedure." Farley v. Henson, 2 F.3d 273, 274 (8th Cir. 1993).

Domestic relations actions as a general rule fall within the broad language of the automatic stay. Thus, property division comes within the scope of the automatic stay. In re Roberge, 188 B.R. 366 (E.D. Va. 1995); In re Classe, 75 B.R. 543 (Bankr. E.D. Mo. 1987); In re Becker, 136 B.R. 113 (Bankr. D.N.J. 1992); In re Sokoloff, 200 B.R. 300 (Bankr. E.D. Pa. 1996); Crowley v. Crowley, 715 S.W.2d 934 (Mo. Ct. App. 1986); Frankel v. Frankel, 274 N.J. Super. 585, 644 A.2d 1132 (App. Div. 1994); Uslar v. Uslar, 253 N.J. Super. 289, 601 A.2d 761 (App. Div. 1992); Rogers v. Rogers, 671 P.2d 160 (Utah 1983); cf. In re Ebel, 874 P.2d 406 (Colo. Ct. App. 1993) (state court divided assets in violation of stay, but federal court then lifted stay to allow division order to issue). The stay prevents further proceedings even if notice of the stay has not been served on a non-bankrupt spouse. Gallant v. Gallant, 882 P.2d 1252 (Alaska 1994).

National Legal Research Group, Inc.


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