Submit your information to schedule a free consultation with attorney Andrew M. Doktofsky.
Bankruptcy and divorce are often intertwined. Financial problems and the stress associated with unmanageable debt can lead to marital discord and eventually divorce. Conversely, divorce itself can be a cause of bankruptcy. One spouse is often left with large debts to be paid, along with child support and/or spousal support. In the past, selling the marital residence would usually result in each spouse receiving a substantial sum of money. However, in recent years, the drastic loss of equity in real estate has left divorcing couples with little or nothing. Finally, the high cost of legal fees associated with a contested divorce in New York consumes what little resources divorcing spouses may have.
Contact the law firm of Andrew M. Doktofsky, P.C. at (631) 673-9600 for your questions about bankruptcy and divorce. Call Andrew M. Doktofsky, P.C. today if you have questions about how bankruptcy will affect your divorce throughout the areas of Suffolk County and Nassau County, New York. This includes Deer Park, Babylon, West Islip, Bay Shore, Brentwood, Hauppauge, Huntington, Lindenhurst,and Hempstead along with all Long Island communities.
Bankruptcy can resolve the problem of which party is responsible for debts accumulated during the marriage. In New York, debts that are accrued during the marriage are deemed to be marital debts, regardless of whose name the debt is in. (The exception to this might be where one party incurred debt for purchases that were solely for the benefit of that party, as opposed to debts incurred for family expenses.) As long as the parties are still married, they can file a joint bankruptcy petition, even if they are physically separated. Of course, this requires that the parties are able to cooperate with each other and with their bankruptcy attorney. The benefit is that the divorce can proceed with the issue of marital debt having been resolved. This will help the parties reach a settlement in the divorce case.
On the other hand, there may be advantages to filing for bankruptcy after the divorce is final. Although obligations incurred pursuant to a divorce are not dischargeable in Chapter 7, debts owed to a spouse pursuant to a divorce, that are not in the nature of support, are dischargeable in Chapter 13.
Whether one or both spouses in a New York divorce should file for bankruptcy depends primarily on the amount of debt in each party’s name, as well as in whose name the marital assets are titled, such as real estate, automobiles, and bank accounts. Simply discharging the debt of one spouse, while leaving the other with a large amount of debt, will not resolve the issue of who must pay for the remaining marital debts.
When a bankruptcy case is filed, an automatic stay goes into effect. The automatic stay prevents creditors from taking any action to collect debts owed by the debtor. Court proceedings in which the debtor is a defendant are normally stayed. However, the automatic stay does not apply to the commencement or continuation of a civil action or proceeding for the following categories, i.e. these proceedings are not stayed by the filing of a bankruptcy.
What is important to note is that to the extent that marital property is to be distributed in a New York divorce action, the divorce is stayed by a bankruptcy filing. For the divorce action to proceed, it will be necessary to wait until the bankruptcy case is closed or the debtor receives a discharge (either of which terminates the automatic stay). Or, the non-filing spouse would need to seek relief from the automatic stay in order to continue with the divorce action.
The automatic stay also does not apply to the following:
Contact the law firm of Andrew M. Doktofsky, P.C. today at (631) 673-9600 for a free consultation about how bankruptcy affects your divorce in Suffolk County and Nassau County. He has represented clients on Long Island in North Bay Shore, North Babylon, Lindenhurst, Commack, Central Islip, Freeport, Long Beach, Amityville and nearby communities. Andrew Doktofsky is an experienced Long Island bankruptcy attorney who has handled many contested divorce cases. He has the knowledge and experience necessary to properly advise you regarding complex bankruptcy issues that arise in divorce cases.