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How Does Divorce Affect Bankruptcy?

How Does Divorce Affect Bankruptcy
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How Does Divorce Affect Bankruptcy?

Divorce in Bankruptcy sometimes causes problems for a debtor.    All records including bank statements, income and expenses are carefully reviewed and required.   Here we have an example wherein a spouse funneled income to herself instead of her doctor/husband.

As they were going through the divorce, the doctor/husband became aware that his wife had converted his funds to her own accounts.

  • That is embezzlement.    This debtor comes to the Bankruptcy Court to file a chapter 7 bankruptcy.   In this way, she hoped that the debt she incurred as a result of the embezzlement would be discharged in her bankruptcy.   How wrong she was.

Divorce can bring to light many financial irregularities which may come back to haunt the “bad” acting spouse.

Bankruptcy and divorce require careful consideration by the Court in reviewing financial transactions.   When you file bankruptcy, you must realize that your financial transactions are carefully reviewed.

How Does Bankruptcy Affect Divorce?

Below is an interesting bankruptcy case where a bankruptcy and a divorce took place at the same time:

Was there bankruptcy protection in the case below?    No

  • Doctor’s Wife was the Manager of his medical practice office.
  • Wife over time diverted approximately $340 thousand for her own use and in her own accounts.
  • This was community property and her husband (Doctor) trusted her.
  • Judgment of Divorce was eventually filed.
  • Husband became aware of the “recordkeeping and banking practices” of his wife.
  • Superior Court found that the wife owed her husband $274,605 plus interest and attorney’s fees.
  • Ex-Wife files for bankruptcy so she would not have to pay this money back.

Outcome:

  • State Court judgment was excepted from discharge; could not be relitigated in Bankruptcy Court.
  • Ex-wife required to pay back her ex-husband and could not defraud the Doctor
  • There was no bankruptcy protection allowed for the Debtor.

When you steal from someone, even a family member, bankruptcy court is not the place to go for relief.

Bankruptcy Protection:

If you are contemplating filing bankruptcy, call me for a free bankruptcy consultation.   I will provide you with expert legal advice.  I am a Board Certified Bankruptcy Lawyer and here to help you with bankruptcy protection.   Ralph A. Ferro, Jr. , Esq. (201)446-5904.