In every California divorce proceeding, both parties must take a good hard look at their joint and individual finances. This is because, at the outset of the divorce process, both parties are required to provide an exhaustive list of all assets, debts, income and expenses. This aids in the division of property and determination of support. However, sometimes once all the facts are laid out in black and white for the parties, they realize that they have much more debt than they originally thought. If the parties' financial situation is dire enough, one or both parties may file bankruptcy.
If you are going through a divorce and are considering filing bankruptcy it is important to discuss this decision with both a bankruptcy attorney and a certified family law specialist. Together, these professionals should be able to give you all of the information necessary to make the decision regarding whether to file for bankruptcy or not. If you decide you would like to file for bankruptcy, you should consider the timing of your filing and the effect it will have on your divorce case.
Once a party to a divorce action files bankruptcy, the bankruptcy case operates as a stay to all proceedings regarding the division of community property that is the property of the bankruptcy estate. The stay does not operate to prevent proceedings to collect, modify or enforce child and/or spousal support payments against current income. Further, the divorce proceeding itself is not stayed. However, a dissolution proceeding cannot be completed until all property is divided. If property division is stayed pursuant to an ongoing bankruptcy case, the resolution of the divorce case will likewise be stayed.
If a divorce judgment is entered in violation of a bankruptcy imposed stay of proceedings, the divorce judgment is still valid. However, the divorce judgment will have no legally binding effect on the bankruptcy case. The divorce judgment is effective and binding as between the parties but has no legal effect on the bankruptcy authorities. The bankruptcy court does have the option to deflect jurisdiction to the family court to establish the character or title to property held in the debtor's estate. Unless and until the bankruptcy court deflects such jurisdiction to the family court, the property of the estate will be controlled by the bankruptcy court. In the context of a post-judgment motion or case where the parties to a family law matter were never married, filing bankruptcy does not stay a request to establish or modify child or spousal support.