Bankruptcy and Divorce - How the automatic stay impacts various family law proceedings.

The Question We Are Going To Answer Today Is:
How does the bankruptcy’s automatic stay impact various types of divorce proceedings?
The Short Answer Is That:
11 out of 13 family law type proceedings are exempted from the bankruptcy’s automatic stay.
The Three Topics We Will Cover Are:
#1. What typically happens the moment a BK is filed?
#2. What types of family law proceedings are affected by bankruptcy’s automatic stay? … and …
#3. What types of family law proceedings are exempted from a bankruptcy’s automatic stay?
So, #1. What typically happens the moment a BK is filed?
Answer: Unless exempted by law, the filing of a BK will automatically impose a stay on any action or proceeding against a debtor and his/her property. The debtor in this case is going to be you or your spouse or your ex-spouse; whomever is filing the bankruptcy. In the family law context, the automatic stay has the potential to impact family law proceedings both BEFORE and AFTER a divorce decree is signed.
For example, if a mother has filed suit against a father to collect past due child support, a bankruptcy stay may bring that suit to a halt depending on the type of bankruptcy the father files…more on that later.
When and if the automatic stay applies, there are at least three things that you should understand about it. First, the stay abates any pending divorce proceeding until the stay is lifted or modified. Second, the stay deprives the divorce court of personal jurisdiction over the debtor and his or her property. And third, as of the time of the stay, all of debtor spouse’s property becomes property of the BK estate.
Now let us move to topic number 2…
 
What types of family law proceedings are affected by bankruptcy’s automatic stay?
Answer: Only two types of family law proceedings are potentially impacted by a bankruptcy stay. The first is a proceeding to divide a couple’s marital property. The second is a proceeding to collect domestic support obligations from a debtor/spouse who files a Chapter 13 BK.
So, for example, if you are trying to collect alimony or child support from a debtor spouse who filed a Chapter 13, you will need the BK judge’s permission before going forward. This is because under a CH. 13 repayment plan, all of the debtor spouse’s post-petition assets become property of the BK estate. SEE In re Welsch, No. 16 B 33498, 3-5 (Bankr. N.D. Ill. Jul. 30, 2019).
Now, when it comes to dividing the couple’s marital property, you should know that, for all practical purposes, the bankruptcy stay is temporary. This is because BK courts usually modify the stay and allow family law judges to go forward with property division.
So, we talked about how the filing of a BK imposes an automatic stay on family law proceedings where the end goal is to divide a couple’s marital property or collect on domestic support obligations. Now let move to our third topic and discuss what types of family law proceedings are exempted from the stay.
There are eleven types of family law proceedings exempted from a bankruptcy’s automatic stay:
1. a suit to determine paternity is exempted;
2. if you are trying to obtain or modify alimony or child support, that proceeding is also exempted;
3. same thing for custody or visitation orders;
4th the BK will not stop a judge from dissolving the marriage;
5. it will also not stop domestic violence proceedings;
6th the automatic stay will not apply if you are trying to collect child support or alimony from a debtor spouse who files a Chapter 7 liquidation bankruptcy. This is because the debtor spouse’s post-petition assets are not part of the bankruptcy estate.
#7. Wage garnishment orders used to collect domestic support are also exempted from the stay.
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