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Some ask why this person did not try to track the assets the soon-to-be ex-spouse is allegedly hiding. Hiding assets prior to filing for bankruptcy and failing to identify the existence of these assets during court proceeding is fraud and perjury under Federal Bankruptcy law. If one wants to make a tidal wave of bad results for a spouse during divorce and a subsequent bankruptcy, this is one certain way.
When someone’s ex-spouse files bankruptcy papers, any efforts to collect on any debts must, by law, stop unless the debts are within one of those types of debt listed as exempt from the bankruptcy law. This stop is called the “automatic stay” in legal parlance. Based on the divorce proceedings, the most important rule and most important exempt category for not losing assets when your ex-spouse files for bankruptcy is the exempting of the start or continuation of a court judgment or its proceedings to set or alter a support award (yours) or collect this support from property and assets that is not listed as property or assets of the bankruptcy estate from the automatic stat. Refer to 11 U.S.C. 362(b)(2). What this means in short is that the current support debts (your ex-spouse’s) are not included in a bankruptcy. Essentially, you do not have to go to bankruptcy court for this. What you need to do to insure that everything you get is support or alimony. The latest bankruptcy laws prevent a malicious ex-spouse from escaping obligation by using bankruptcy. In fact, alimony and child support, especially unpaid, has priority over any other creditor in bankruptcy. Some experts believe, however, that you through your lawyer file a claim, if true, for domestic support, child support, if true. Although it may be messy, it is essential that you state your claim to insure that it is known to the court officials involved, especially for a chapter 7 trustee. Filing the claims requires the court to notify you, and your lawyer and child support agency, when any hearing or request is made by the other party in connection with the bankruptcy.
Another important point is that the new bankruptcy law also prevents discharging non-support obligations from either a divorce or separation in a Chapter 7 bankruptcy. This occurs if the obligation discharge would cause harm the spouse owed the obligation more than the person who owes it, your ex-spouse. Refer to 11 U.S.C. 523(a)(15). A non-dischargeable debt means that your ex-spouse still owes it. Experts recommend that you file a claim or complaint in bankruptcy court to get this property settlement debt exempted from discharge. Even though it might not be necessary, this brings the situation to the court’s attention. If you do not file a claim, the debt could be wiped out and you will not be able to collect it later.
Your recourse if the bankruptcy court does affect your divorce settlement is to return to divorce court to argue for a change in the judgment to increase the settlement.