How Does a Bankruptcy Affect a Michigan Divorce?
Financial difficulties that have plagued a marriage for years or even decades will usually spill over into a divorce proceeding.
Regardless of whether it was filed before, during or after the commencement of divorce proceedings, a bankruptcy can have major implications on the outcome of a divorce.
A Michigan divorce is always litigated in a Michigan circuit court, which is part of the state court system. In contrast, bankruptcies are always filed in a United States Bankruptcy Court, which is part of the federal court system. Parties to both a divorce and a bankruptcy are frequently surprised to learn that the state court system and the federal court system do not necessarily communicate well with each other.
Sometimes one party will file for bankruptcy before, during or after a divorce proceeding in an attempt to avoid child support or spousal support orders. However, in almost every situation, a bankruptcy action will not relieve a party of a circuit court-ordered obligation to pay child support or spousal support. No matter how ironclad such a rule is, there are nonetheless always going to be parties attempting to use a bankruptcy for such a purpose. A well-qualified Michigan family law attorney will know how to recognize this trick as its happening.
Every divorce will ultimately address the various debts that have been acquired during the course of a marriage. Most married couples will have two types of debt. Joint debts are those debts in which both parties are named on a bank note, car loan, mortgage, etc. Individual debts are those debts that are solely in the name of one party. If a husband and wife file bankruptcy together, then it is likely that the bankruptcy will seek a dismissal or restructuring of all the joint and individual debts of the marriage. The parties are required to provide the bankruptcy court with a complete listing of each and every debt. However, if only one of the two spouses is seeking bankruptcy protection, the process can get complicated. A bankruptcy court could potentially relieve one spouse of their obligations towards joint debts while still leaving the other spouse liable for the debt. A well-qualified Michigan family law attorney will know how to spot this issue as it arises and act accordingly on behalf of his client.
Bankruptcy and the “Automatic Stay”
Perhaps the most frustrating aspect of a bankruptcy filing in the middle of a divorce proceeding is what is known as an “automatic stay.” In our system of justice, the Federal Court system is superior to the State Court system. Therefore, a bankruptcy filing (which is a federal lawsuit) takes precedence over a divorce proceeding (which is a state lawsuit). The event of the bankruptcy proceeding will trigger an automatic stay of the divorce case, meaning that the divorce case will be stopped dead in its tracks until the bankruptcy proceeding runs its course. In some instances, a bankruptcy proceeding can take six months to a year, or even longer. Unfortunately, some parties to a pending divorce will deceitfully file for bankruptcy, not because they really desire bankruptcy protection, but because they know it will greatly delay the divorce case. It can be emotionally crushing to have a legal trick place your life in further limbo. A well-qualified Michigan family law attorney will be able to recognize this deceitful maneuver when it happens. It requires extra time, effort and legal costs, but if it's truly a deceitful bankruptcy filing, your Michigan family law attorney may be able to persuade the bankruptcy court to “lift” its automatic stay, allowing the divorce proceeding to get back on track.
Bankruptcy law is a world unto itself. There are a multitude of different rules and procedures that can affect different divorce proceedings, each in its own unique way.
As a general rule, do not file for bankruptcy without first consulting your Michigan family law attorney.
If you are considering divorce or have been served divorce papers, call me. I've helped hundreds of people protect their family and their assets and I can help you. For a FREE Consultation Call (248) 921-7164