Ex husband or wife filed bankruptcy and they were supposed to pay the bills. Now you are being sued, your are wages garnished, or you are suffering a bank attachment or bank garnishment, or all of the above. You need to follow the lead of one of my favorite movies, Blazing Saddles. The sheriff is on the podium and he says, “Excuse me while I whip this out.” He reaches in his pants and pulls out his appointment papers. I want you to do the same thing. Right now. Whip out those divorce papers.
Go to the part that says your ex has to pay the bills. You see it? See if there is a hold harmless clause. This can go by the 25 cent legal name of “indemnification clause.” It means that if he or she fails to perform and as a result you suffer a loss, they must reimburse you for that. If the ex files bankruptcy what losses can you suffer? How about:
- You get sued.
- Bank attachment.
- You pay legal bills to defend lawsuits,
- or to file your own bankruptcy.
Since the Bankruptcy Abuse and Consumer Protection Act (BAPCPA) in October, 2005 any items your ex is required to pay from a divorce court order or separation agreement for the benefit of you or a child can no longer be discharged in a chapter 7 bankruptcy. It can be discharged in a chapter 13, but that requires you and the creditors to be paid as part of a court ordered payment plan.
Before October 17, 2005 I routinely discharged these types of things in chapter 7 cases. No more. Doesn’t matter if the divorce was before BAPCPA. The divorce obligations of your ex will survive his bankruptcy filing. The real difficulty is that when the court approved the divorce papers, all of your assets and debts were divided. When a former spouse files bankruptcy, it shifts the balance created by the divorce all to one person if you cosigned any of the marital bills. Even if you have done everything right financially, unless you have great income, generous friends or relatives, or are independently wealthy you will sink under this heavy financial burden.
The divorce court never intended for you to have your obligations as well as your spouse’s. Remember, even if the divorce judge says your ex had to pay a joint debt, that does not bind the creditor. They don’t care who the money comes from as long as they get it. That is why you are at risk for the actions listed above.
Unless you experience a financial miracle, to prevent these indignities, bankruptcy will be in your future as well. If you have time on your side you might consider a contempt action against the former spouse. Even if the underlying debt is discharged the divorce court could order him to pay it to protect you. Unfortunately if you are like most of us, you will wait until the last minute, and the money has already been taken from your bank account, and you need fast action. Bankruptcy is your best bet.
Bankruptcy will stop the third party collection enforcement against you, so you can continue to go forward with your life. Don’t rule out another visit to the divorce court though. Bankruptcy is expensive, especially when your lawyer needs to stop lawsuits, garnishment, and bank attachments. Remember those divorce papers? Once you have concluded the bankruptcy, that is when you should file a contempt action against the ex. If the divorce decree has that hold harmless clause your ex is still responsible for your out of pocket losses. That means any money taken from you by the creditors, and get this: your bankruptcy attorney fees and expenses are also out of pocket losses you suffered by their failure to follow the court orders. Just think, hubby or wifey paying for your bankruptcy. If they drop the ball again they face fines, jail, and they still owe you the money to boot! Justice has suddenly gotten sweeter.