Bankruptcy and Divorce in New York: What you should know

If your spouse files for bankruptcy while an action for divorce is pending, this will likely halt the divorce proceedings if there are property settlement issues to be resolved. The reason is that when someone files bankruptcy, they get something called an AUTOMATIC STAY. That is a fancy term for “everything stops.” If you are the spouse of such a person and you are trying to get divorced, it can be a frustrating thing, but you cannot proceed with a divorce proceeding if your spouse has obtained an automatic stay in a bankruptcy proceeding – unless there are on property settlement issues and your divorce is strictly uncontested.

However, if you were already divorced, your spouse cannot file bankruptcy to escape paying child support or alimony payments which were already ordered to you. Once an order of support is in place, your spouse is stuck and filing bankruptcy won’t change things.

Even if a bankruptcy proceeding is pending, and your spouse has an automatic stay, it does not prevent you from going forward on a child custody and visitation case in family court, or to establish paternity of your child, getting alimony that is not a part of the bankruptcy estate, taking the tax refund for child support, and enforcing a medical support order.

When someone files bankruptcy, there are certain things that are “exempt” meaning that the spouse can keep those things after the bankruptcy. Some of that is cash. That means creditors can’t touch the things that are exempt. But as a former spouse, you can go after exempt property to fulfill child support and spousal support obligations if your spouse filed a chapter 7 bankruptcy. If your spouse filed a chapter 13 bankruptcy, seek relief from the automatic stay before going after exempt property.