Bankruptcy law offers a fresh start to those bogged down by crippling debt. But, alas, there is more to it. To qualify for bankruptcy you need to document your finances and demonstrate a financial hardship. In California, the bankruptcy system can look back four years to see if your divorce was a relatively fair deal between you and your ex-spouse. Why do they care?
In some divorces people are so eager to get out of the marriage they find themselves thinking, and sometimes saying “Take everything, I don’t care just leave me alone.” In other cases, the spouses collude to have one spouse take all the bills and the other take the house, retirement and other assets in order to allow one spouse to avoid bankruptcy altogether. If your ex-spouse got a sweetheart deal that can be unfair to creditors which becomes a problem if you file bankruptcy. The bankruptcy system may question whether you can reopen the divorce to pursue adequate money to resolve your debts. Perhaps you can or should have fought for half the equity in a house. Perhaps you can or should have fought for alimony. In an extreme case your bankruptcy can be dismissed (debts not forgiven) on the basis that your divorce was a scheme to defraud creditors. Conversely, if you ended up with most of the assets from a divorce and nevertheless encounter financial problems and ultimately file bankruptcy, the bankruptcy system will not question the divorce.
That’s quite a bit of scare talk, right? However, there’s no often no reason to worry. The truth is divorce and bankruptcy commonly go hand-in-hand. Financial problems strain a marriage and are often the root cause of divorce. The bankruptcy system will inquire about a divorce but rarely is any action taken and in nearly all cases the bankruptcy is approved.
Another common question is: does my ex-spouse need to know that I filed for bankruptcy? The answer is yes if you owe money to your ex-spouse for any reason including alimony, child support or have joint debts. However, if you have no financial ties to your ex-spouse the court will not notify that person of your bankruptcy and usually that person will not find out.
At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation. We have offices in Walnut Creek, Antioch, and Hercules.