Can Filing For Bankruptcy Negatively Affect My Divorce Proceedings?

October 7th, 2024 by Tiffany Hughes

For individuals facing both divorce and financial distress in Illinois, the decision to file for bankruptcy in a divorce can be fraught with uncertainty. Among the concerns is how filing for bankruptcy may influence ongoing or impending divorce proceeding. Understanding the specific implications of bankruptcy on divorce in Illinois is crucial for navigating the complex legal matters of bankruptcy and divorce in Illinois.

Bankruptcy and Divorce Basics

In Illinois, individuals typically file for bankruptcy under Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7 bankruptcy involves the liquidation of assets to discharge debts, while Chapter 13 bankruptcy involves the creation of a repayment plan to satisfy debts over time.

Divorce in Illinois follows the principles of equitable distribution, meaning marital property is divided fairly but not necessarily equally between spouses. Courts consider various factors, including each spouse’s contributions to the marriage, the duration of the marriage, and the economic circumstances of each party.

Potential Impacts of Bankruptcy on Divorce in Illinois

When considering how filing for bankruptcy may affect divorce proceedings in Illinois, several key considerations need to be considered:

1. Automatic Stay:

Similar to bankruptcy proceedings in other states, filing for bankruptcy triggers an automatic stay in Illinois, which halts most collection actions by creditors. The automatic stay may impact divorce proceedings by delaying the division of assets and debts until the bankruptcy court determines how a party’s assets and debts should be addressed.

2. Property Division:

Illinois law distinguishes between marital property (assets acquired during the marriage) and non-marital property (assets acquired before the marriage or through inheritance or gift). While marital property is subject to equitable distribution in divorce, non-marital property is generally excluded from the division. Bankruptcy can complicate equitable distribution in divorce, particularly if assets are commingled or if exemptions are claimed.

3. Bankruptcy’s Affect on Paying for Maintenance and Child Support:

Debts arising from spousal support and child support are generally non-dischargeable in bankruptcy. Therefore, even if one spouse files for bankruptcy in divorce, they remain obligated to fulfill their support obligations in accordance with the divorce decree or court order. You or your spouse cannot avoid paying maintenance or child support, even if bankruptcy is declared.

4. Joint Debts in Bankruptcy:

If spouses have joint debts, such as mortgages or credit cards, filing for bankruptcy in divorce can impact the non-filing spouse’s liability for joint debts. While bankruptcy may discharge the filing spouse’s obligation to repay joint debts, it does not necessarily release the non-filing spouse from responsibility for joint debts unless other arrangements are made.

Navigating Bankruptcy and Divorce in Illinois

Given the potential complexities, individuals facing both bankruptcy and divorce in Illinois should consider the following steps:

1. Seek Legal Counsel:

Consult with experienced bankruptcy and family law attorneys in Illinois to understand your rights, obligations, and options in both bankruptcy and divorce proceedings. Having skilled divorce and bankruptcy attorneys in order to provide guidance on divorce and bankruptcy can protect you and your assets while your spouse or you file for bankruptcy.

2. When to File for Bankruptcy During a Divorce:

It is important to consider the timing of when to file for bankruptcy during a divorce. Depending on your circumstances, it may be advantageous to file for bankruptcy before, during, or after the divorce process.

3. How to Protect Your Assets When Your Spouse is Filing for Bankruptcy:

If your spouse is filing for bankruptcy, one way to attempt to protect your marital assets is by creating a constructive trust. With a trust, both spouses would be required to act in good faith in the administration of the trust. However, if the trust is not enough to protect your marital assets, you could have a claim of dissipation against the bankrupting spouse, which could result in said spouse having to reimburse the marital estate.

4. Court Coordination:

Be prepared for coordination between bankruptcy and divorce courts in Illinois. Providing relevant information and documentation to both courts can help ensure consistency and fairness in outcomes. Declaring all assets, both marital and non-marital assets, as well as being transparent about your financials will expedite both proceedings.

Navigating the intersection of bankruptcy and divorce in Illinois requires careful consideration of the specific legal implications and proactive planning. By seeking professional guidance, understanding your rights and obligations, and effectively communicating with all parties involved, you can navigate the complex matters of bankruptcy and divorce in Illinois with greater clarity and confidence.

Need More Information or Representation?

If you or your spouse are considering filing for bankruptcy in your divorce and need advice on how each case’s proceedings will affect the other, or need help protecting your assets when your spouse is filing for bankruptcy or for a divorce, give The Law Office of Tiffany M. Hughes, P.C. a call today at 773-893-0228 for a confidential,complimentary 30-minute phone consultation or email Tiffany Hughes directly at Tiffanyhughes@thugheslaw.com. Our entire practice is solely dedicated to the area of family law. We are highly experienced in providing legal representation if you have a divorce in Illinois, bankruptcy in divorce, timeline for bankruptcy in divorce, guidance on divorce and bankruptcy, bankruptcy on marital assets and non-marital assets, protecting assets when spouse is filing for bankruptcy, automatic stay in divorce, joint debts in bankruptcy, and child support and maintenance payments in divorce and bankruptcy proceedings.

About Tiffany M. Hughes, Divorce Attorney, Principal, Managing Partner, The Law Office of Tiffany M. Hughes, P.C.:

         Tiffany M. Hughes is a divorce attorney and Managing Partner of The Law office of Tiffany M. Hughes. Recognized as a Top 100 Lawyer in Lawyers Magazine in 2018 and 2019, Super Lawyer from 2016 to date, and in addition to numerous other accolades, Ms. Hughes represents individuals in all aspects of family and matrimonial law proceedings, including litigation, mediation, allocation of parental responsibility (formerly known as custody), parentage, divorce and other child-related matters.

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This blog is made available by The Law Office of Tiffany M. Hughes, P.C. for educational purposes only as well as to give you general information and a general understanding of Illinois law, not to provide specific legal advice. By using this website you understand that there is no attorney client relationship between you and The Law Office of Tiffany M. Hughes, P.C. The website should not be used as a substitute for competent legal advice from a licensed professional attorney in Illinois.  The law changes constantly and we do not go back in time to edit old posts that may be affected by these changes.  If you have any questions about Illinois law, which is the only State this blog and website discusses, please call The Law Office of Tiffany M. Hughes, P.C. for a complimentary phone consultation and do not draw any legal conclusions without speaking to a competent attorney in Illinois first.