The Messy Mix of Divorce and Bankruptcy in Indiana

October 7, 2012 1:02 pm Published by

I use stories from Consumer Bankruptcy News, the journal which keeps me informed about court cases of  individual bankruptcy in Indiana and all across the country, to clarify to Bankruptcy in Indiana readers the way the law actually works. Over my 25 years practicing individual bankruptcy law here, I’ve learned that, when bankruptcy law and divorce are mixed together in one case, the mix is often messy! Today’s story from New Jersey proves the point.

  • Jon. & Ethel L. started divorce proceedings after nine years of marriage.
     
  • Ethel owed her divorce lawyer, B., $8,800 in legal fees.
     
  • A year later, Ron & Ethel filed a joint bankruptcy Chapter 7.
     
  • B., the lawyer, filed a claim saying that her fees should not be discharged through bankruptcy.  (The attorney wanted to establish that her fee was part of a marital; obligation. In divorce, maintenance (alimony) or child support obligations are not dischargeable through filing personal bankruptcy.

As a longtime debt consolidation lawyer offering Indiana bankruptcy help, I’ve learned that a large number of the women who file individual bankruptcy had either gone through a divorce or were dealing with an upcoming divorce. As every one of the good bankruptcy attorneys in the five Zuckerberg bankruptcy law offices would agree, when divorce is part of the picture for women in bankruptcy, financial problems are often even greater.

There are a couple of Indiana bankruptcy rules of thumb that you need to know to understand why the bankruptcy court ruled in favor of Ethel and did allow the $8,800 legal fee to be treated as a debt that could be discharged through bankruptcy.

a) Bankruptcy deals only with debts that exist on the day you file.  The debt to the divorce attorney did already exist on the day Ethel filed bankruptcy.

b) The fee that Ethel owed her attorney was not an obligation of her spouse for her maintenance or for support of her children.  “It was a debt,” the court ruled, “That Ms. L. incurred in furtherance of her own maintenance and support.”
 

My colleague the Richmond, Indiana bankruptcy lawyer agrees with me that questions do come up very frequently when, after a divorce, one spouse files – or both spouses file individual bankruptcy in Indiana. As every good bankruptcy attorney in Indiana knows, divorce and bankruptcy are two totally separate legal proceedings, yet often they can affect each other.

It sounds complicated, but, believe me, it makes things so much simpler when the bankruptcy lawyer and the divorce lawyers can coordinate their efforts!

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This post was written by Mark Zuckerberg

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