Articles Posted in Chp 7 Bankruptcy; Divorce and Bankruptcy

In a recently released decision, the United States Tenth Circuit Court of Appeals affirmed a district court and lower bankruptcy court decision to partially lift the automatic stay on the litigation of a bankruptcy debtor’s domestic support obligation after a creditor alleged that the debtor and his ex-wife colluded to keep assets from creditors in the bankruptcy by using a fraudulent divorce settlement agreement.

house-1172352In the case, Lavenhar v. First American Title Insurance, the Tenth Circuit agreed with the lower courts that the creditor should be permitted to litigate the allegations of fraud in the state court divorce action, and it rejected the debtor’s claim that the bankruptcy trustee was the only party that had standing to challenge the debtor’s divorce settlement. Based on this ruling, the Chapter 7 creditors involved in the bankruptcy may be given access to nearly $500,000 worth of property that was awarded to the debtor’s ex-wife as part of the divorce settlement.

Allegations That The Divorce Was Used by the Debtor and Spouse to Keep Assets from the Bankruptcy Trustee.

According to the Tenth Circuit’s opinion, the debtor and his spouse agreed to divorce each other, and the debtor filed for Chapter 7 bankruptcy, all while the creditor was attempting to execute a judgment on the debtor to take possession of a home that the couple owned. The filing of the divorce action and bankruptcy automatically prevented the judgment creditor from proceeding to take the home because of the automatic stay that prevents the collection of marital property when one or both divorcing parties file for bankruptcy.

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With recent news that Kentucky’s divorce rate is much higher than the national average, it’s important to note that while a divorce can cause severe emotional issues, there are also obvious financial issues that can arise.

It’s certainly possible that considering filing for bankruptcy in Louisville could help couples who are in the processes of filing for divorce or whose divorce has been finalized.
Especially in this current economy, our Louisville bankruptcy lawyers have been able to help many people who have fallen on hard times after having to split assets and begin living with one income instead of two. Alimony payments, child support and other expenses may have made money tight.

The Louisville City Examiner recently reported that Kentucky’s divorce rate is 33 percent higher than the national average, according to census figures. The state’s rate works out to roughly 13 per 1,000 people. Nationwide, the average is 9.5 per 1,000 who end up getting divorced.

Residents of the South have had higher divorce rates, in general, than other regions of the country in recent years as well. As recent as 2009 data, the rates were 10.2 per 1,000 for men and 11.1 per 1,000 women. At the time, the national numbers were 9.2 for men and 9.7 for women. In the Northeast, divorce rates were lower — 7.2 for men and 7.5 for women.

Experts believe that divorce rates are higher because marriage rates are higher. People in other parts of the country also wait longer to get married, while Southerners are more apt to get married at a younger age. Education and employment are also factors in the numbers being higher.

So, what does this have to do with money? Any time a couple splits up, their lives change. If they have purchased a house together and now are getting divorced, it’s likely that neither wants to keep the house because what once was considered a good investment is now a losing proposition.

Other assets will have to be divided and debt will be split up as well. There are tax implications that can come back to haunt divorcees as well.

It’s possible that a couple could decide to file a joint bankruptcy before they get divorced in order to eliminate debt before the split is final. That will allow them to eliminate one more problem they need to deal with after the divorce.

But oftentimes, the breakup is so difficult they are unwilling to consider that. If a divorced person comes out of a split with mounds of debt and less cash than he or she had before, it’s possible that bankruptcy could help. Filing for bankruptcy stops debt collections and allows the person to eliminate debt.

If you have just gone through a divorce or you are in the process, take a look at your finances. A divorce provides the chance for a fresh start. So, why hang on to the financial baggage, too? Consider a bankruptcy to get rid of your debt and wipe the slate clean as you start a new life.

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In most divorce cases, both parties have a substantial amount of debt. In fact, it is frequently debt that is one of the major causes of the divorce. Therefore, one of the issues that often arises in divorce cases is how that debt is going to be divided between the parties. While dividing up assets is fairly straight forward, dividing up debt can be much more complicated.


By: Tracy L. Hirsch, Attorney

It should come as no surprise that one of the biggest stress factors in divorce is finances. Oftentimes, some of the largest contributing factors to a divorce are debt and financial distress. Given the current state of the economy, couples who are considering divorce need to be concerned about how their current debts will be divided. In many circumstances, couples who are already in financial despair find themselves completely overwhelmed as their households are divided and they are forced to support two household with the income that used to support just one.

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