Getting divorced during a bankruptcy presents major ethical considerations for your Georgia bankruptcy attorney when a husband and wife file a case together (See Georgia Model Rules of Professional Conduct).  In an individual case, your Georgia bankruptcy attorney may simply need to file amendment reflecting the loss income of the spouse and a new expense list.  In either situation, the bankruptcy attorney will need to sit down with the client and review the entire case.

Divorce in Joint Bankruptcy Cases

In a joint case, your attorney has an ethical duty of loyalty to both the husband and the wife.  How can your bankruptcy attorney be one hundred percent loyal to you and your spouse at the same time if a conflict arises?  Its impossible.  As a result, most attorneys will withdraw from representing either party.  Any attorney that fails to withdraw in conflict situations may face sanctions from the Bankruptcy Court.

Example of Conflict in a Joint Bankruptcy Case

An example of a conflict that would force a bankruptcy attorney to withdraw from the case is a reaffirmation agreement.  Lets say you have a husband and wife that are joint signers on a note for a 2009 Monster Large Truck.  The husband loves the Monster Truck and does not want to give it up at any cost.  In contrast, the wife is ready to get divorced and move on with a fresh start in life.  In this scenario, it is clearly not in the best interest of the wife to reaffirm this debt.

Lets say she reaffirmed this debt.  A few years down the road, ex-husband is remarried and has two children by his new wife in his new life.  Out of the blue, he loses his job.  He can no longer afford the Monster Truck.  Sadly, the car creditor repossesses the Monster Truck.  Then, the creditor follows Georgia law and auctions it off.  Unfortunately, the Monster Truck sells for less than half of what is owed to the creditor.  Guess who is going to get sued for the deficiency?  Drum roll please.  The answer is the ex-wife.  She thought she moved on with a new start in life.  She had heard about his new wife and children.  She thought it was all behind her until the Floyd County Sheriff show up at her house one fine summer afternoon in front of all the neighbors and served the lawsuit from the creditor.

In divorce situations, it is always best for debtors to have separate attorneys.

Since hiring a new attorney to review your entire case and proceed with continuing the case is expensive, most joint debtors will beg their attorney to keep representing them both to save money.  In this situation, the attorney will have the clients sign an agreement stating that they understand the potential for conflict and that the attorney will withdraw from representing either debtor in the event a conflict arises.

In cases where there is no secured debt or when every type of secured collateral is being surrendered to the creditors, the chance for conflict is low.

Other Posts

1.  Bankruptcy and Divorce Orders /a>

2.  Should I File Bankruptcy Before or After the Divorce?

3.  How Much Does it Cost to File Bankruptcy?

4.  What is Chapter 13?

Bankruptcy often follows divorce. I recently met with a bankruptcy client in my Rome GA office who went through a nasty divorce proceeding about two years ago. The judge in the divorce case ordered my client to sign his interest in a house with equity over to his now ex-wife. His ex-wife and his four children still live in this house.

After the divorce, my client had a tough time paying his child support and his living expenses. Hoping that his situation would improve, he incurred some credit card debt to make ends meet. Unfortunately for my client, things did not work out as he hoped. He lost his job and had to file bankruptcy.

His major concern was that if he filed bankruptcy, would a bankruptcy trustee try to take back the house away from his ex-wife? Would his property transfer be at risk as a result of the bankruptcy? As a general rule, the answer to this question is no. Georgia bankruptcy trustees do not try to overturn a divorce order unless there are extremely exceptional circumstances.

It is extremely important in every bankruptcy case to disclose all transfers of any type of property that has occurred within the last two years.

In the bankruptcy petition, statement of financial affairs question number 10 specifically requests the information. In this section, a bankruptcy debtor must disclose the date of the transfer, the recipient of the transfer, the relationship of the recipient to the debtor, the fair market value of the property in question, and the amount of any debt owed on the property at the time of transfer. I like to specify that the transfer was made pursuant to a divorce decree.

It is always a great idea to have your bankruptcy attorney review your order from the divorce court. If there any issues, you want to discover them before your bankruptcy case is filed.

Failure to completely answer all questions in the statement of financial affairs can land you in jail. At the very least, it will make the bankruptcy trustee suspicious of you and put your case under even more scrutiny.

Other Posts:

1. Should I tell my attorney everything?

2. How do I protect my assets in a bankruptcy?

3. Top Ten Myths About Bankruptcy

4. Personal Injury Lawsuits Must be Listed in your case!

In my experience, I have seen many clients who have been forced to file either Chapter 13 or Chapter 7 because of a recent divorce.  When the household income is cut in half but the household expenses remain the same, paying credit card debt is impossible.

A common post-divorce example is that each spouse is ordered by a divorce judge to pay half of all joint debts.  When one person gets into a situation where they can’t pay, the other person often hauls them back into divorce court for a contempt proceeding for not paying the joint debt.  Usually the cause of one spouse not paying is a loss of job or new expenses from a new marriage/new family.  Contempt proceedings in divorce court may get the nonpaying ex-spouse to come up with funds to avoid going to jail in the short term but the underlying situation does not change.  Whatever the cause, the nonpaying ex-spouse cannot pay.  This cycle continues until the person who has been paying their side of the debts can no longer afford to pay an attorney to keep hauling the other person into divorce court.  After thousands of dollars and heartache, both end up filing bankruptcy.

Couples who are under financial strain should consider bankruptcy before the divorce.  It does not cost anything to meet with me and let me analyze your situation.  Perhaps the removal of the financial strain might save the marriage?