If you are in the midst of a lengthy divorce, and you suspect your ex-spouse may file for bankruptcy protection, you are better off seeking more child and spousal support, rather than seeking a settlement that consists mainly of physical property. The reason for this is that according to Colorado bankruptcy law, domestic support obligations can no longer be discharged in a bankruptcy. This means that even if your spouse ends up filing for bankruptcy, his or her obligations to you must still be met.
Conversely, a property settlement can be discharged during bankruptcy proceedings, and may even damage your credit if your name is on the original loan documents at the time of the filing. Unless your name is permanently and legally disassociated with the loan, the lender may try to collect the portion awarded to you in the divorce settlement.
In the event of a bankruptcy that follows a divorce, bankruptcy courts will need to determine what is considered part of your property settlement and what is considered support.
Before your divorce becomes final, it may make sense to re-word your agreement to make your spouse’s obligations to you appear as much like support payments as possible.
Working with a Colorado Springs Family Law Attorney will help you protect your financial interests and maintain a stable financial future, in spite of your ex-spouse’s bankruptcy.