Bankruptcy And Family Law : Your New Frontier

wedding rings broken-istockDivorce is one of the three major predictors of bankruptcy filing, along with job loss and illness.

Families that might have been making it as a single household are now two households.  Debts manageable before are now crushing.

Or, families weren’t making it and the stress over money troubles hastens the end of the marriage.

Opportunity in divorce

For a bankruptcy lawyer, master the family law issues in bankruptcy and become known in the family law bar of your community, and the universe of bankruptcy cases you can handle competently mushrooms.

Family law issues in bankruptcy has long been an area of interest for me.  The overlay of state law based family law and federal bankruptcy law produces fascinating and unexpected outcomes.

So, I propose that we poke around in this corner of bankruptcy for some weeks here on Mastery.

State law makes a difference

First, there’s something you need to know.

I practice in a community property state, California.  What I know about family law and bankruptcy is shaped and colored by our community property scheme.

Where a bankruptcy result is triggered by marital property law, perhaps the best thing I can do is point you to finding out how the issue is handled under the law of your state.

Better yet, perhaps those who practice under other marital property systems will add their two cents in the comments and we can all learn something.

 Are your loyalties divided

When a married couple comes to see you, you have an immediate problem, at least theoretically.

A lawyer friend of mine put it thus:  anytime there are two people sitting across from you, you have a conflict of interest.

That pithy expression has stuck with me and made me continually aware that even a happily married couple may have different legal interests. Add a little marital discord, and the conflict probably increases.

So one of the questions on the screening questionnaire that new clients fill out before we sit down asks if they are separated from their spouse or considering divorce. If the answer is yes, you need to proceed with caution.

There be dragons, as early map makers helpfully provided.

Coping with conflicts

I have no hard and fast rules on what to do when they acknowledge they are heading for divorce. It triggers  the discussion about conflicts with the couple.

I need to assess whether they appear to be able to communicate and work together toward getting out of debt.

More often than in other situations, I tend to send out a letter following our meeting that makes a record of our discussion about conflicts.

If we, the couple and I, decide that I will represent them in a joint case, one of my ground rules is that anything either one tells me, I will be free to share with the other.  In other words, I will not keep the secrets of one spouse from the other.

Further, if an actual and insurmountable conflict or divergence arises, they are told upfront that I will withdraw and represent neither of them going forward.

Finally, if Chapter 13 is the prudent choice for them, in light of tax or real estate issues, I won’t represent a couple intending to separate in a joint 13.  A successful 13 requires years of cooperation;  the court doesn’t understand “my half of the payment” when there’s a financial default.

I can’t say these are foolproof practices or the only ones you can adopt.  I can say you need to think the conflicts issue through before you become embroiled.

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