What happens to your Chapter 13 case if your spouse files for divorce? If your spouse has filed for divorce, major changes can come quickly to your financial situation. Your Chapter 13 case can be handled in two primary ways if a divorce situation develops. You can either “stay the course” or consider other options.
Remaining in Chapter 13 despite the divorce: Staying the Course
Even though your spouse has filed for divorce during Chapter 13, you both may still be entitled to receive relief in Chapter 13. If you stay the course, you will eventually receive your discharge of debts. If you are capable of making the ongoing Chapter 13 payment yourself, then you may not need to make any changes to your case. In other cases – although this may not be recommended – both parties in the divorce situation can agree to make a portion of the Chapter 13 payment. If a Chapter 13 case is almost complete, continuing in the Chapter 13 could be more feasible than if the Chapter 13 case has just begun.
Considering Other Options
You may instead consider other options besides Chapter 13 if a divorce situation develops. You may not want to be locked down in a Chapter 13 plan for several years if you are no longer on good terms with your spouse. Other possible options may include both spouses converting the case to Chapter 7. Another option may be bifurcating the case into two separate cases in which one spouse stays in the Chapter 13 and the other spouse converts their part to Chapter 7. Because your financial situation is changing, it is very likely that additional options outside of the Chapter 13 will become available.
Remember, divorce actions can bring a conflict of interest or the lack of trustworthiness. Therefore, if an option outside of a combined Chapter 13 case is available, you may want to take advantage of that option quickly. It is not advisable to wait because in the future you may not be eligible for options present in a quickly changing financial situation. In addition, if sufficient conflict or disharmony arises, you may even need to seek separate bankruptcy or debt relief counsel.
Options outside of bankruptcy may also become available in a divorce situation. Depending on the amount of each party’s debts, you may be able to seek outside options. Plans can change dramatically in a divorce situation. When plans change, non-bankruptcy options may open up to deal with your debts.