Divorce and Bankruptcy: Frequent & Discordant Pairing

Incendiary combination:  family law and bankruptcy

 

I hadn’t hit the steps of my office  on the way back  from a speaking engagement before the phone rang with a resulting referral.

My speech addressed  the intersection of bankruptcy and family law.   What a fruitful pairing.

While my presentation to a bar section of family lawyers was entitled When Worlds Collide,  it could have been Vinegar & Soda, or Matches & Paper.

When the two intersect, the interaction is chemical and startling.

Even if you aren’t ready to face a room full of other lawyers with prickly facts and complex questions, mastering the family law issues in bankruptcy is an essential step to broadening the range of clients you can serve well.

What you need to know

Create a chart of  family law issues of the divorce issues

  • Support
  • Division of property
  • Non support debts owed by spouse  to spouses
  • Marital debts owed to third parties

Then for each of the divorce concepts, look at bankruptcy concepts:

  • Stay
  • Chapter
  • Property of the estate
  • Priority for payment of claims
  • Discharge

You can see the number of  different combinations of issues.   Then add that the result of your analysis may be different depending on whether the divorce is anticipated, pending, or concluded.  Is your mind throbbing yet?

The family law/bankruptcy intersection also highlights the role of state law.  State law controls the characterization of the property that comes into the bankruptcy estate.  So, you may get different answers to any fact pattern depending on whether you are in a community property state, an equitable division state, or a state that recognizes tenancies by the entirities.

The take away

The legal market  cannot support for the long haul the number of lawyers who have flocked to bankruptcy.  If you expect to survive and thrive, you need to expand your skill set so that you can take on more complex cases.  Family law, along with small business cases and tax issues, are the sub specialities that will grow your practice.

The second point is that family law can be complex.  Don’t plunge in without adequate thought, and line up a mentor, an experienced lawyer on whom you can call for a second opinion.

 

Image courtesy of Wikimedia.

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  • Richard P

    Very interesting article and good insight.

  • Jlclark

    I agree – I started out doing family law, and that background has been extremely helpful in my bankruptcy practice.  Family law attorneys are excellent sources of referrals, and we often coordinate our representation of clients.
     

    • Cathy

      As I prepared that speech, it popped into my head that family lawyers and bankruptcy lawyers kinda run legal wreaking yards, where broken down clients are towed for makeover.

  • Morrisja00

    This is a complicated part of BK I agree.

    I had a client with two child support obligations to two
    Mothers of his three children. One former spouse demanded he
    Indemnify her on an old joint credit card debt. They had no
    provision in a court order that provided for this.

    My client declined to indemnify former spouse.

    We are waiting to see what happens next.

    Jackson Morris
    Attorney
    Belmont

    • Cathy

      Take a look at whether state law provides a basis for indemnification when two parties are jointly liable on a debt.  Since the debt to the creditor preexisted the divorce, I would expect that the obligation to both the former spouse and the card issuer is dischargeable in bankruptcy.