Of course, not all divorce proceedings which will ultimately be impacted by bankruptcy are conducted in a spirit of cooperation. Timing in these cases becomes even more crucial. When a bankruptcy petition is filed, divorce proceedings are stayed, property division is halted, and community property comes under the control of the bankruptcy estate. If the debtor spouse files for bankruptcy before a dissolution, the non-debtor spouse’s community property also becomes part of the bankruptcy estate, with the result that the trustee can sell property, such as a family home, right out from under the non-debtor spouse.
Bankruptcy in Non-Amicable Divorce
Only be in relatively amicable divorce situations, in which the spouses are attempting to mutually optimize their post-divorce financial pictures that a family law practitioner would be advising a client to hasten a bankruptcy filing. It would be the unusual situation, to say the least, in which an attorney with a client contemplating the more typically adversarial divorce would advise him or her to file for bankruptcy if the client’s individual financial situation did not warrant it.
However, if a client was in dire financial straights, a pre-divorce bankruptcy filing could result in a more modest and realistic divorce settlement obligation for a potential payor, and a more realistic support award for a potential payee.