Divorce during bankruptcy
By Cathy Moran, California bankruptcy lawyer on Aug 10, 2007 in Bankruptcy Practice and Procedure, Chapter 13 Bankruptcy, General Bankruptcy Information, Marriage and Debt
A married couple in a pending Chapter 13 case can separate their bankruptcy cases without refiling. This issue usually comes up when the spouses divorce.
Spouses are the only people entitled to file a joint bankruptcy case. When you dig into the law, it is still two cases, but the clerk gives the joint cases a single case number and the cases are administered together.
A joint case can be “deconsolidated” by motion. One of the cases will get a new case number. After deconsolidation, each debtor can make an independent decision about the course of their case. One spouse may choose to convert their case to Chapter 7. If each remains in Chapter 13, they alone are responsible for making the plan payment. Each can modify their plan to be consistent with their ability to pay or with their portion of the liquidation test.
Conversely, there is nothing that says a couple who divorces during a Chapter 13 must deconsolidate. Their right to file a joint case was determined by their marital status when the case was initiated.
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