Flint Divorce and Bankruptcy, 810-235-1970

Did you know that when a bankruptcy case is filed during a divorce against a spouse while a divorce is pending, complete exclusive jurisdiction over the property of the of the married couple (the bankruptcy estate) is automatically transferred to the bankruptcy court.

This article prepared by Flint Bankruptcy Attorney Terry R. Bankert 235-1970

A legal term the bankruptcy estate is created when the bankruptcy case is filed.

The bankruptcy estate consists of all property of the debtor, it includes all property of the debtor “wherever located and by whomever held
The divorce court’s ability to take action against property of the debtor’s estate is automatically stayed or limited.

There are some exceptions to the automatic stay pertaining to family law matters. The non debtor spouse may need to file a claim.

Most Bankruptcies are chapter 7—Liquidation: In this bankruptcy proceeding, the debtor turns over all nonexempt property to the Chapter 7 trustee, whose job it is to sell or liquidate the property and distribute the proceeds to creditors pro rata, usually in a one-time payment once all of the assets have been administered. There are exceptions based on the type of assets. Most people Chapter 7 keep all of their possessions.

Exempt property is property of the bankruptcy estate that the debtor can keep to implement the fresh start policies of the Bankruptcy Code and that is protected from distribution to creditors. However, certain types of claims, such as nondischargeable tax claims and Domestic Support Orders , can be recovered even from exempt property.

The Bankruptcy Code allows a debtor to exemption schemes. Exemptions allow debtors to exclude various types of property from the bankruptcy estate.Each individual debtor may take the following exemptions:
homestead (up to $21,625)
motor vehicle (up to $3,450)
household furnishings (up to $11,525)
jewelry (up to $1,450)
“wild card”—$1,075 plus up to $10,825 of any unused homestead exemption—this may be applied to anything
tools of the trade (up to $2,175)
unmatured life insurance contract
dividends from unmatured life insurance (up to $11,525)
health aids
right to receive Social Security benefit; veterans benefit; disability benefit; alimony or support; and payment under a stock, bonus, pension, profitsharing, or similar plan
right to receive an award or payment related to reparations for a crime, wrongful death, a life insurance contract, personal bodily injury, or loss of future earnings
retirement funds

The Chapter 7 trustee will also investigate the debtor’s financial affairs to determine the location of any nonexempt property (including causes of action) that can be turned into cash for distribution to creditors. The debtor will be released (i.e., discharged) from the unpaid portion of most types of debts. However debts owing to a spouse, former spouse, or child of the debtor and arising out of a divorce or separation are nondischargeable.

The main reason why an individual files bankruptcy is to try to secure a discharge from his or her debts.All individual debtors are eligible to receive a discharge unless he or she has committed one of the “bad acts”.

However, even if a debtor is entitled to a discharge certain types of debt are nondischargeable. Some debts (including Domestic Support Orders and other debts arising out of divorce or separation proceedings) must be paid even by a debtor who has otherwise been discharged of his or her other obligations.

To file a bankruptcy, an individual must, within the 180-day period preceding the date of filing, receive an individual or group briefing outlining the opportunities for available credit counseling and assisting the individual to prepare a budget analysis.

If the debtor’s income is less than the median income for a family the size of the debtor’s, the debtor meets the safe harbor provision and does not need to perform the means test calculations and will qualify to file Chapter Seven Bankruptcy.

Prepared by
Flint Bankruptcy Attorney Terry R. Bankert 235-1970

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