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Colorado Divorce Law – What if Your Ex Files for Bankruptcy?

Tuesday, 23 September 2014

colorado springs law firm 3If you have reason to believe your ex-spouse could file for bankruptcy, you need to do what you can to protect your interests. This is particularly true when it comes to any pending property settlements or joint accounts. Things change after a Colorado divorce settlement, but that doesn't mean that you should face a penalty because of your ex-spouses mishaps. Whether you've learned about a potential bankruptcy from the court or through a mutual friend; don't bury your head in the sand, take the time to find out what's going on.

How does the bankruptcy process work?

If you are listed on your ex-spouse's bankruptcy petition as a creditor, you should be receiving a notice from the bankruptcy court about the filing, including a date and time for the first 341 meeting, also known as the "meeting of creditors." Also, you should be aware of the deadlines for filing a claim. Be sure to complete the Proof of Claim form and file it with bankruptcy court before the deadline.

Bankruptcy and Property Settlements

Bankruptcy law reforms make non-support obligations from a divorce non-dischargeable in a Chapter 7 case. As the spouse who's owed, you have to show that the discharge of the obligation would harm you more than it would harm your ex-spouse. Non-dischargeable means your ex-spouse is still responsible for it.

You should file a complaint in bankruptcy court to get your property settlement debt excepted from discharge. If you don't file a claim with the bankruptcy court, the debt may be wiped out, and you won't be able to collect it later.

Also, take the time to learn about dischargeable debts and the difference between a Chapter 7 and Chapter 13 bankruptcy. For example, debts arising from divorce property settlements may be dischargeable in a Chapter 13 bankruptcy, but not in a Chapter 7.

Find out how the laws in Colorado affect divorce-related obligations, including property settlement and support. A lot will depend on whether you have minor children and if there is a need for support at the time of divorce. It will also make a difference if you are paid in a lump sum vs. installments. In general, the way in which a divorce decree is written can affect whether the bankruptcy court will discharge the debt.

Bankruptcy and support obligations

Support is treated differently than other debts, in that it survives a bankruptcy. If your bankrupt ex only owes you support, there is no need for you to go to bankruptcy court. This decision is a result of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, which gives unpaid child support and alimony claims priority over any other creditors' claims, including taxes. This puts current support obligations first in line for payment. However, if you're owed back support, it's very important that you file a proof of claim with the bankruptcy court to receive payment.

Returning To Divorce Court after bankruptcy

If the bankruptcy court allows your ex to discharge debts owed to you or third party creditors under your divorce decree, you have the option of returning to divorce court to ask the court to increase your alimony or child support. This petition must be based on a change in your financial circumstances due to either the necessity to pay additional debt or the realities of not receiving property you were awarded.

Unlike alimony and support payments, the terms of a property settlement are usually not subject to change because of changed circumstances. There are exceptions, like fraud or duress. You will have a heavy burden of showing the court that fraud was involved even if your ex-spouse filed for bankruptcy immediately after the divorce was final.

If you're the spouse who pays child support or alimony, there is nothing shameful about going back to the divorce court to ask for a reduction in support payments to fit your current reduced financial circumstances. It is much better than being stuck with debt you'll never be able to pay.
As you can see, the issues of bankruptcy after a Colorado Springs divorce are confusing at best, and highly damaging at worst. If you find yourself in this position, it makes sense to find a bankruptcy lawyer who can help you with all the issues.

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MPatMarrisonFor over a quarter century, we have helped people during what is often the darkest time in their lives. Divorce is not easy even under the best of circumstances. For most people, family is central. Having something go wrong in the family can have a ripple effect that extends beyond the home and into other areas.

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