A marital settlement, binding outside of bankruptcy, means little in Chapter 13.
No matter how prejudicial or unfair, a Chapter 13 discharge will relieve a former spouse of obligations of all obligations to their ex except for support.
It’s too late to protect your hard won rights to non support payments once the bankruptcy is filed.
Let’s look at how ex spouses are vulnerable to a bankruptcy discharge, then explore ways to eliminate or reduce your exposure to a later bankruptcy filing by your ex.
Only in 13
Chapter 13 is a reorganization plan for individuals with regular income and debts less than the statutory ceilings.
It’s the only kind of bankruptcy case that allows a debtor to discharge non support obligations to a former spouse.
All debts owed to a spouse or child are non dischargeable in Chapter 7.
So, any obligation to pay to equalize the division of property or any obligation to hold a former spouse harmless from a debt of the marriage is ripe for discharge in Chapter 13.
The only lever a creditor-spouse has is to challenge the confirmation of a Chapter 13 plan for failure to comply with the law or for lack of good faith. That’s chancy and expensive.
Prevention is more reliable.
Make your divorce bankruptcy-proof
Here are five strategies to insulate the division of assets and debts from upset by a Chapter 13 bankruptcy by one of the former spouses. [Read more…]