Join us as we sit down with Pacific Cascade's Bankruptcy Attorney, Darin Wisehart, to discuss the relationship between bankruptcy and divorce cases, and important tips to keep in mind when filing to help ensure a smooth process on both fronts. In this episode, Darin discusses the following:
• The different types of bankruptcies and how they interact with a divorce case
• How creditors are impacted by dividing debts in a divorce
• How joint marital debts are treated in a bankruptcy case
• Should you file for bankruptcy before, during, or after a divorce?
• What happens when a bankrupt spouse still owes money to the other spouse as a part of the property division in divorce decree?
• Can property received in a divorce be subject to repossession if an ex-spouse files a bankruptcy?
• ...and much more!
If you would like to speak with one of our family law attorneys, please call our office at (503) 227-0200, or visit our website at https://www.landerholmlaw.com.
Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.
Join us as we sit down with Pacific Cascade's Bankruptcy Attorney, Darin Wisehart, to discuss the relationship between bankruptcy and divorce cases, and important tips to keep in mind when filing to help ensure a smooth process on both fronts. In this episode, Darin discusses the following:
• The different types of bankruptcies and how they interact with a divorce case
• How creditors are impacted by dividing debts in a divorce
• How joint marital debts are treated in a bankruptcy case
• Should you file for bankruptcy before, during, or after a divorce?
• What happens when a bankrupt spouse still owes money to the other spouse as a part of the property division in divorce decree?
• Can property received in a divorce be subject to repossession if an ex-spouse files a bankruptcy?
• ...and much more!
If you would like to speak with one of our family law attorneys, please call our office at (503) 227-0200, or visit our website at https://www.landerholmlaw.com.
Disclaimer: Nothing in this communication is intended to provide legal advice nor does it constitute a client-attorney relationship, therefore you should not interpret the contents as such.
Intro:
Welcome to Modern Family Matters, a podcast devoted to exploring family law topics that matter most to you. Covering a wide range of legal, personal, and family law matters, with expert analysis from skilled attorneys and professional guests, we hope that our podcast provides answers, clarity, and guidance towards a better tomorrow for you and your family. Here's your host, Steve Altishin.
Steve Altishin 0:31
Hi, everyone. I'm Steve Altishin, Director of Client Partnerships here at Pacific Cascade Family Law. Today, we're here with Attorney Darin Wisehart to talk about what you need to know about bankruptcy and divorce, how they interact and impact each other. Good morning Darin, how're you doing today?
Darin Wisehart 0:50
I'm great. I'm great. How you doing?
Steve Altishin 0:52
I'm doing well. So, before we started, can you just tell us a little bit about yourself.
Darin Wisehart 0:58
So I'm an attorney that's been doing bankruptcy law for the better part of my career for about 12 years. And I've been kind of handling different types of bankruptcies, chapter seven, chapter 13, a little bit of consumer issues as well. So kind of thrown back and forth between all of the things that deal with bankruptcy and consumer law, and those types of claims.
Steve Altishin 1:23
Perfect, perfect, perfect person for this job. So, bankruptcy, divorce, how they interact... can you start by giving us a little primer on what a bankruptcy actually is, and maybe the most common types of bankruptcy that spouses or maybe even ex spouses might typically be looking at?
Darin Wisehart 1:45
Sure, sure. So bankruptcy is the the ability to not have an obligation to pay debts in the future. And it's got this trade off that is kind of on a bigger picture idea of, you take the debts that you have, if you can pay off some of them you use a disposable income scale to determine what's going to be paid off, what's going to be payable, and you have to qualify for different types. So the two main types that we always talk about are chapter seven and chapter 13. And what we're talking about with chapter seven, it's usually a shorter case, it's usually three to four months, if all goes smoothly. It's the type of case that it's designed to allow you to kind of ride through with your normal items. You have to have exemptions to cover things. So exemptions, we think of those as the umbrella that covers your items. So if you have normal household goods, normal clothes, normal jewelry, usually you'll be able to keep those without any worry of anybody taking those. Now, when you file a case, you're assigned a case number, and the trustee is the person, that middle person that kind of reviews your situation, reviews your documents, makes sure everything's in order. They're the ones that are going to look at everything to see if there is anything to liquidate. And so the chapter seven is called a liquidation, because if you do have something that's above, that's valued more than what exemption you can cover it with, then the idea with bankruptcy is that you're going to pay back on that amount, or you're going to lose the item. And that's why it's called a liquidation. That's why it's important to know that going into it, because if you do have an item there, then the trustee can take it. And with chapter seven, you don't get to get out. Once you file, you're in. You can't say oh, wait a second, I want out of this thing. You can't do that. So it's important to think about that as you get in, before you go through the door. And with that chapter seven, it's a good tool to get rid of your credit card debt and your medical debt that have kind of been lingering and collecting, maybe they're garnishing. Wherever they are in the process, it's the trade off of making sure that if you have assets that are above exemptions, you might lose those, or you might have to repay those, but it gives you the ability then to zero out those debts at the end of the case, and move on with what they call the fresh start. And that allows you then to open the doors on other, get that credit clean up going and get moving forward without having to worry about that debt chasing you for the next however many years. And so that's your common chapter seven. So when we talk to chapter 13, we talk the other path. The chapter 13 is a different, it's got a lot of the same pieces, but it's a different animal. It's designed then to kind of stretch out what you have to pay, and it's also used when you can't qualify for chapter seven. So let's say your income is too high. And as a household, you don't have enough. So, in order to qualify for the seven, the skinny of that is your household size is judged against the income that comes into the house. And you have to be at or under the median income of a household your size in your county. And so of course that's a lot of jargon, and I don't want to throw out too much, but it really is the scale of what puts you in a seven and 13. And there are other exceptions. So there's a lot of little pieces to talk about there, too. I'm not covering everything, this is more broad picture, but the chapter 13, then some of the people who have higher income, go to a chapter 13. And that's called a reorganization, that allows you then to pay over time the debts that wouldn't be taken care of in chapter seven, or to pay your disposable income, which is kind of the number that the court deems as fair for you to repay. Now, the beauty of that is your attorney and yourself, we're going to create your budget, you're going to come up with a number that you have leftover at the end of the month. And so that amount is supposed to be what your disposable income is. And that's what you're supposed to pay towards the bankruptcy on the first number, which is what can you pay? And when you do that, then if you get to the end of the case, and that's all you do, you just pay what you an pay, and that's all you need, then at the end of the case, whatever's leftover is zeroed out. And that's the trade off for being able to file that chapter seven reorganization. And getting through the process, maybe not paying 100% of the creditors, maybe you only paid 30%, or in a lot of my cases, 5% or 10%. You're not paying too much, but you're getting through that three to five year span. And and then at the end of it, you get what they call the discharge, which is zero out of these debts. And that's what you're looking for.
Steve Altishin 6:29
That's a great foundation to start this conversation. Getting to the divorce and creditors. I mean, why do we need to do bankruptcy? I mean, if if my debts are split up in a divorce, and my ex spouse has to pay them all, aren't I already off the hook? I think the answer's no.
Darin Wisehart 6:51
Yes, the answer is certainly no, certainly no. So when you have a debt, if both people are on the debt, or you're in a community property state, you have a debt that both of you can then be collected on. Okay, so the creditors have their hooks in you, okay, and now you go through a family law, let's say you go through a divorce. You get that divorce decree, and the judge in their really nice clothes, you know, they're up there and they look all official, and they say, okay, this person has to pay those debts. And the other person is saying, "Great!, I don't have to pay those debts, I can wash my hands of those debts. And I'll move on with my life." The problem with that is the creditors, they don't really care what the judge said, okay? So their agreement with you was signed well before this judge made a determination, and this judge can't alter that agreement. And so what happens is the creditor then, they go collect and ask questions later. And they can collect on either one of the people that are on the debt, they don't really have to care what the divorce decree says. And so what we always get, we always get the call from the individual who's saying, "Well, wait a second, why am I getting collected on by this creditor, it says in my divorce decree that that person is supposed to pay for it." And you know, the creditor, it's not their job to think about that, they have your name on it. And that means they can come after you for 100%. Now, if they come after you and they collect the money, then you have a cause of action against that other person, because you do have an order signed by a judge that says that they're supposed to pay for it. So you can go talk to your family law attorney, and you can go after them to get that money back; you may be in contempt, or whatever you have to do to go after them. But the creditor, their job is not to figure that out. Their job is to take money and ask questions later.
Steve Altishin 8:41
So let's then move on to one of the topics I hear a lot. And it's people who are asking, "There's a support obligations. Can I get rid of that by filing a bankruptcy, Seven or 13?"
Darin Wisehart 8:58
Yeah, the straight answer on that is, it's been tried many, many, many times, and it doesn't happen, it doesn't work. And because there's an exception to discharge for domestic support obligations, and that is alimony and spousal support, child support, all the things that fall under that. And it can even be considered attorneys fees to get that child support, spousal support, all that, opposing attorney fees as well. So there's a big ball of items that you cannot take care of. You can't zero out, and we're talking about discharge or zeroing out the debts is what we're talking about here. Chapter seven or chapter 13 does not help do that. It won't get you free of those of those fees. Now, it is important to remember that a chapter 13 can help if you're behind. So if you need to catch up in those debts, then you can file a Chapter 13, and it's important to talk through what that means and how that can play out if you need to catch up those amounts. But to answer the question just clear, the domestic support obligation is likely not going anywhere. And it's one of those that's going to be around when the case finishes, it's called an Exception to Discharge. And there's a whole section on this, that as a bankruptcy attorney, we look at pretty often.
Steve Altishin 10:19
So then what about the joint debts we talked a little bit about, from the creditor, but going into bankruptcy with joint debts, how does that work?
Darin Wisehart 10:30
So if you go into bankruptcy with a joint debt, now we're kind of getting into that question of whether it's good to file before or after. We'll touch on that a little bit more, I think, with the later part of this. But with a joint debt, you go into a bankruptcy and the idea is, if both of you have filed the case, then both of you have shared the cost, which is always cheaper, and you share the court fee, which means you only have to pay one time. If you're legally married, you can file together. And then, the idea is to then zero out these joint debts, and for both people, then you get a chance to zero them out. Now one person, in Oregon and in some states across the United States, they're allowed to file individually. So where I practice, typically, in Oregon, you're allowed to file with one person and the partner does not have to file. And so what that means is if you file and you're zero out for this debt that you're on the hook for, then the other person is still on the hook for that debt 100%. And so, you zero out and they call you, they're violating the rules because now they're trying to collect on somebody that's gone through bankruptcy. And that's a violation of the automatic state, or the discharge, depending on when they called. But if the other person is still on the hook for that debt, then that creditor can go after, just turn their sights to this other person and say, I'm going to go after that person.
Steve Altishin 11:59
So if I showed the other foot, if I'm the person who has the debt, the joint debt that I'm supposed to pay, and I go into bankruptcy, does that mean that I don't have to worry about the judge in the divorce court coming back after me for not paying what I was supposed to pay?
Darin Wisehart 12:21
We'd like to think that. And that's, I mean, that's one of those ideas with the bankruptcy, the idea with bankruptcy is to give you that fresh start. And bankruptcy really seeks to give you the fresh start wherever they can. But in this case, they decided to cut out an exception for that discharge. And that is to allow the judge then to come after you for contempt of the order. And it's definitely an area that you want to speak with an attorney if you have that situation, because they can get very complex, they can get very long drawn out, of course, with contentiousness especially, with the fighting that that can go on sometimes in divorces. But you want to make sure you speak with an attorney about those specifically, because there are angles on both sides. And you see creative attorneys try to tackle that. But at the same time, the idea with it is that there's a carve out, and there's the idea that you're in contempt of this order that this judge signed in your family law issue. And it may supersede that issue in bankruptcy.
Steve Altishin 13:22
So I can't get out of my spousal support or my child support by filing a bankruptcy, it sounds like. But, let's say we have a property settlement. And part of the property settlement, you know, because everything isn't always equal-a house is more than a bank account or a pension or something-- and I end up having a judgment where I gotta pay my spouse $50,000 to equal it all out. And then I go bankrupt, but I can get rid of that, can't I?
Darin Wisehart 13:57
Property settlements are one of those, here's the thing, I always say with these you always want to look at every specific case, because every case could have something a little bit different, every one of these has one element that's different. And in the property settlement, the chapter 13 may be able to take care of a property settlement debt. And that's one of the only ones that has that carve out. Now, if it's considered a domestic support obligation by any judge, then it's going to come back under that window of, this is a domestic support obligation, and it's not going to zero out. But there is a chance with chapter 13 that you can take a look at a property settlement. And it's it's a complex area, we could do an entire new class on that one, a new Facebook Live on that one, just particularly because if you have that, you need to speak with an attorney as soon as you can.
Steve Altishin 14:49
That makes complete sense. I mean, it sounds like there are laws both in the bankruptcy court and in the divorce court that are going to be either dealing together with this, or maybe at odds at some point. So I mean, it almost feels like there are two layers of law that kind of rule in this thing.
Darin Wisehart 15:15
There certainly is. And there's always that interplay between state law, which is your county courts, and federal law, which is the kind of the United States idea, bankruptcy is federal law, bankruptcy is all the United States. And so when we look at bankruptcy, if I move to another state, if I work in another state, the general idea, the code is going to be the same. And it's always going to be the same. The local rules might change a little bit by area to area, and the union in different circuits. I mean, first circuit, Ninth Circuit, there's the different appeals court areas, and the laws will change for those areas. And then of course, the Supreme Court says it, it's good for everybody, right. So that's, that's how the federal will look with bankruptcy. And they'll have interplay with the state courts, because they allow exceptions, a lot of states allowing exemptions for the different states to come in and be those those exemptions and allow you then to use their state exemptions to protect your items. And in our state in Oregon, you can use both, you can use the federal and the state. And so you get a choice when you start. And that allows you then to look at your your items in California, they have two lines of state exemptions that they can use, one protects your house larger, and one protects your items if you don't have a house, and puts more money towards that. So there's the interplay that always happens between the state and the federal. And and this, the Federal the bankruptcy courts, they like to defer to the state for different rules. And family law is one of those areas where they try to apply your own state's laws as they go through it so that they don't just walk all over your laws and say, "hey, we know what happened here, but we don't care, we're going to do whatever we want", the federal tries to kind of dance around it and and be nice about, hey, we want to make sure that if you have a family law judgment, we have a divorce decree something like that, we want to give that credence even if you get through bankruptcy, we don't want to just throw it out, because that's not the right way to do it.
Steve Altishin 17:14
That kind of leads to a section that we we had been talking about that it's a big question. And it's that sort of, when do I file for bankruptcy? What kind of a bankruptcy do I file? And, for instance, my, I'm coming to you, and I'd say, "well, I've got, I've got child support, I'm behind on and they're about to come throw me in jail, I got a spouse far behind on what the heck do I know, is one bankruptcy better than another and his timing and issue and all that kind of stuff?"
Darin Wisehart 17:50
Yeah, with that particular scenario, timing is not quite as much of an issue because you want to get filed as soon as you can. Because likely, if you're behind on child support, likely to state sinking their teeth into you, they're usually garnishing, they're doing what they can. And of course, your ex spouse, they want to start payments, they want to get payments going as soon as they can, too. So they want to get you on a path that gets money into their budget. And I mean, it's in everybody's interest to try to get filed as soon as you can. Of course, I always say, fast is not necessarily rushed. So at the same time, we want to think about whether or not it's the right move for you, we want to make sure that all the other little pieces are going to fall into place. And we want to know what's going to happen with everything. Because bankruptcy is not just one thing. You can't call and say, "hey Darin, I want to catch up with this one thing. I want to catch up with my spousal support, and I don't want my house or my car or my or my house in Hawaii, I don't want any of that stuff affected." And so then you think, well, that's not how bankruptcy works. Bankruptcy is an all or nothing. So when we file we want to know how it affects these other things. But talking specifically to the question, if you're behind on spousal support, or child support a chapter 13 is your way to go. Now that's the longer one, that's the one that allows payments over three to five years, you don't want to do a seven because a chapter seven really is not going to catch you up any, it's just going to, it's going to get rid of the rest of the stuff, which could help it could, it could help to get those other creditors off your back and then free up some money in your budget to allow you then to divert money to catching up that spousal support or the child support. And so it does have some positive there. But typically, we look at both of those. And the chapter 13 then allows the the catch-up, which was the what they call the cure, and the cure is what allows payments over time. So, so the idea is, once you file, let's say we filed today, and everything that I owed in the past if I still owe that child support spousal support, it's it's stuck into a category and I got to repay that by the time I finish my chapter 13. And so, it'll get paid and we usually will do an "equal monthly payments." Now you can be creative with how you do the payments. But typically you just say, okay, let's get a budget together, let's figure out how much you can pay monthly, and let's make sure that you can make that payment to catch up that amount, over up to five years, and you get up to five years to pay it off, that catches it up. And then you have to make sure that once you file that you're making your normal spousal support or child support payments after the filing date. Because that's required, you have to keep current. And that allows you then at the end of the thing, at the end of the three to five years, however long you have to go, you're cured, you're caught up, you're done. It also the gigantic one is on the day that you file carrying all the way back to our filing date, which would be theoretically today, it allows you to stop a garnishment that's happening, that's, the state, sinking their teeth into your paycheck every every pay period, and making it tough for you to make those normal bills. And it really gets you a chance to kind of take control over that budget, and you still have to hit the number, it still has to be you know, it's still tough for some people. But you're you're going to have control over how the budget is created. And then what do you have to pay? What do we need to pay to get this thing finished and done successfully?
Steve Altishin 21:12
Two questions on that, I guess. First, well, if if the five years are up, and and I'm struggling, and I'm not gonna make it, can I just file another one?
Darin Wisehart 21:27
Interesting question. And yes, you can, because well, there's a few different things that you'll do. So first, you'll be communicating with your attorney over the course of that. And the idea with bankruptcy chapter 13 Is that your attorney's fees will get paid over time through your bankruptcy plan. And so you'll be communicating that. And hopefully, you'll you'll see the writing on the wall well before that end in the 60th month counts, because if you're there, you're you kind of too late, you've taken, you've closed some of the doors that you may have had open, but you're going to analyze that over over the course of the case, and then say you're getting behind again, maybe your budgets just not allowing, maybe you get laid off, maybe something happened, five years is a long time. So things can happen. Maybe you move to another state who knows, if that happens, you're going to communicate that with your attorney, and you're going to figure out how you can either make the payments, and then of course, you can always in chapter 13, it has a gigantic card that people can play. And it is, "I have the ability to dismiss at any time." And that allows you then if you're off path, if you get off path, for whatever reason, you can look at whether it's in your interest to dismiss the case, and then you can start a new case to try to do it again, when the situation is the right. And at that point, you're you're very well versed on what you're supposed to do. So then everybody can get in the boat very educated on how they're going. And know, can we do it? Or can we not, and you do happen, sometimes you happen where you get to towards the end of the case, and you think, there's still $8,000 left to pay, we can't pay it. So let's, how about we just dismiss this one, and or we allow this one to discharge to finish successfully if we can, and and then we get rid of that unsecured debt, the credit cards, the medical, all that stuff. And then we can file a new chapter 13 not looking for a discharge of any debt, but just looking to then spread that payment out. And, and we sometimes call that a chapter 20, when we talk about putting a chapter seven, with a chapter 13, because that chapter 13 filed after is not looking for the discharge, we're looking for discharge of the chapter seven to wipe away all the junk, the credit cards and the medical debt and the collections, the personal loans, all that stuff. And then we look at the chapter 13, then to even out those, those back child support back spousal support payments, that you need to get the garnishment to stop maybe of taxes that didn't go away with a chapter seven. Maybe you want to catch up a house, or catch up your car payment, all these kinds of things. These are reasons why you might file a Chapter 13 anyway, but you might file a Chapter 13 After you've zeroed out that unsecured debt with a chapter seven.
Steve Altishin 24:04
Well, that's that's, that's really interesting to know. So let's move towards the wind. Because I know you've talked about getting the major question that goes into bankruptcies is just, we're thinking even, we're not doing well, marriage is not doing well or financial trouble, do I file now, do I wait, do I file during the during the divorce? I mean, that's not necessarily an easy question is it?
Darin Wisehart 24:35
It is not an easy question. And it really needs the review of an attorney before and I always tell people, I tell these people as many times as I can say it, you want to make sure you get that consultation with an attorney, as you're starting to think about these things because the more doors you can open and keep open, that's the more options that you might have. And in bankruptcy, it's not playing the game, in a way other than just saying, "Hey, these are the rules, and I'm going to play by the rules, I'm going to do what I'm supposed to do." And timing is a gigantic thing when it comes to bankruptcy. In some situations, it's a good idea to file together, a lot of times, we might file a Chapter Seven, before you, you look at the Family Law proceedings, if you can cooperate, of course, you have to be able to get in the boat together, because you have to move together because your, your bankruptcy attorney has to represent you together in order to file that joint case. But if you can't, then maybe you file a Chapter seven separate. But if you do that, like we said, before, you're paying attorneys fees for each person, you're paying court fees for each person, any other separate case number to get the same goal done. So you, you really can put them together and economics say that, paying once rather than twice is much better idea, right? So, when you go through it before you can chapter seven, you can you can write off this debt. And that allows you then it's a gigantic card to use if you can make it happen. If you qualify for the seven, of course, sometimes it helps you to qualify with the whole family, because maybe you have a member of the family that's not working. Or maybe you have all the kids available as dependents and your household size can be bigger to qualify for seven. And that'll allow you then to to qualify for this seven, whereas maybe after you wouldn't, and and then it allows you then to get into the process, zero out that unsecured debt, which is your credit card debt, your medical debt, your personal loans, your payday loans, all the stuff that it's that little stuff that is going to have to come into play. If you don't get rid of it. It comes into play for the family law proceeding, because then they have the court has to figure out who's going to be paying that. And how is it going to be taken care of? Is it going to be both? Is it going to be that one, it's going to be this one. And they they'll they're going to need to decide that? Well, if you file a seven together prior to going through the family law proceeding, then nobody has to figure that out. Because it's been zeroed out for everybody. So now you have a chance to go through the door of the of the divorce court and have that, your custody issue and your and your separation of assets and things like that. It also makes it clear for what assets are there. And sometimes I hear attorneys, family law attorneys, if I file a bankruptcy for both of them, I'll hear family law attorneys open up those bankruptcy documents and say, well, here are all the assets listed nice and clean. Everything's truth, truthful and honest. And we know what's here, we know we have to split, we know what you know what's worth what we have estimates on values, and it can make it very simplified on the assets and the debt side of your of your divorce. So it kind of just takes away those big pieces that sometimes are fighting points when you go through the family law issue. As you go through each step, it just takes one of those or two of those variables out of it. And then you can just focus on the custody issue or the other issues that might still be there.
Steve Altishin 27:56
So, when you say file before, do you mean file before you start the divorce, as opposed to file before the divorce is over. Because I imagine that if you get into the middle of a divorce and file, or if once a one person files before the divorce, then you get into a divorce, that that can kind of upset the applecart a little bit.
Darin Wisehart 28:29
Very much so. So I would even say one step further, I would use the the old grab the monkey wrench and throw the monkey wrench into it. Because that's, that's what you're doing. It's and it gets really complex because then if one person in the middle, in my mind, you always either want to file before or after, you don't ever want to file in the middle. And I do see it happen periodically, I'll see cases where people will file in the middle. And then they have to, so they file, they get the automatic stay that stops any collection any process to deal with money. It doesn't stop any criminal events. It doesn't stop any, technically it doesn't stop the family law or the custody or any of that. But usually the the smart attorney will then say, "Okay, well, we got to put a pause on this. We got to go to the bankruptcy court to go before the judge and ask the judge if we can move forward with his family law with the divorce proceedings." And they they will usually do that. And the judge will usually grant it but it takes time it takes money on both sides, then you have to have your attorneys, maybe even hire bankruptcy attorneys to figure out how the bankruptcy plays into where you are. I mean, think of it as being in the middle of a river and all of a sudden, one person wants to jump out temporarily and then they're gonna have to jump back in the river and now everybody's looking around going what you know, what are we doing? Where are we at? So they they will talk to the judge they'll get approval they'll go back they'll continue costs extra money for everybody. And and really, it's not going to achieve any true goals for the most part. Every once in a while I see a reason an offshoot reason why it might help but most of the time all it does is prolong the event make it more contentious. And really, it doesn't accomplish very many goals other than pausing your proceedings and and costing extra money.
Steve Altishin 30:12
Sounds like there are a lot of pretty good reasons to file and complete the bankruptcy before you file for your divorce. What about after? What about waiting to even file for the bankruptcy till the divorce is done? Is there any benefits for that?
Darin Wisehart 30:31
Yeah, there are a lot of benefits for that. And that's typically when I look at scenarios if I have people calling me for this, this type of question, that's usually where where I advise they go. Because usually you have, okay, you have the debts, you're gonna have to figure out the debts anyway. And typically, if they're calling me, they're calling me before the family law event, they're independent, they're probably not on good communication terms, they're not able to file a case together, there's, there's going to be a lot of reasons they're, they're a little bit too late to file for, for a chapter seven, because they're just too close to a family law event, whatever's happening is already taking its course with with their relationship and with the household. And so I will usually say, "well let the dust settle on your bankruptcy or on your family law event, and on your divorce decree, and get to the point where you're finished, you have your assets all cordoned off, you have everything there, make sure a judge signs it it's a it's a big event in bankruptcy. It's a major question from trustees and from from the case is is, was this where both people represented, was it even? Or did you sign something that somebody had all the power?" And and sometimes trustees at the end of a bankruptcy, or at the end of a, during a bankruptcy after a family law divorce decree or something like that has taken effect, they can, they can undo the divorce decree, if it was unbalanced when you when you guys went through the process, so you want to make sure that, that you have a good balance on what you're getting and what you're trading off. And if you're both represented, typically, that's going to be acceptable, because then you're balanced if you're both represented with equal counsel. So you want to look at that. And when you look at a bankruptcy afterwards, first of all, you'd never want to file a Chapter 13, before you went through the divorce, because chapter 13 is three to five years. And so anytime you talk about somebody who has higher income, somebody who has a, an asset, where they have a lot of equity in their house, they have maybe $100,000, sitting in the bank, you know, things like this, maybe a house in Hawaii, who knows, they're going to want to file a Chapter 13 anyway, if they file any bankruptcy, and that bankruptcy then is going to be filed, you're going to want to file that after the family law event. Because if you're looking at a family law, the divorce, you're looking to go into that process, you don't want to be stuck with this person connected to this person for three to five years. And that's something that, you you would typically advise, and it has its advantages and disadvantages on on both sides, you're going to take a little plus and minus. And it's it comes back to something that I say with bankruptcy all the time, there's always a negative, there's always a positive for for things that you do. That's how they design it. And and with chapter 13, you would just file afterwards independently by yourself, just roll forward, now you're not married, so you can't file any way together. And and with the divorce decree that'll separate your items, it'll figure out what you need to do with your your debts. So of course back to our question on, on, if the debt is supposed to be paid by you, or if it's, you know, supposed to be paid by the other person, it's still going to be on your list. So if you're there, you know, they you file a Chapter 13 is still going to be a creditor, you still going to want to list them, even though maybe your ex spouse is supposed to pay it, it's still going to be there. And it has to be there. That's that's what, the code would require your name is there, and they can collect on you. So you want to make sure they're included in your bankruptcy.
Steve Altishin 33:56
So let's say my ex spouse files, the chapter 13, after the divorce. I realized I can't, we can't file a "co 13," we're not married anymore. But is there any sort of coordination that goes on if I come into you and say, "well, I think I need to file a 13 now because all the debts are the both of ours?" Do they coordinate at all or look at each other at all.
Darin Wisehart 34:21
Every once in a while you'll have some inner inner, like interlocking things that happen in two cases where ex spouses were there, or maybe you choose to do it before and you're just going to push off the the divorce for three to five years and just go through chapter 13 independently. That does happen periodically. There'll be there'll be co cases and there'll be linked. But and this happens sometimes when when both people are on the home loan, or both people, whatever it happens to be, maybe you have two houses and each person you have two signers on each one of the the the mortgages and the creditors the mortgage creditors are not going to let the other person off of the mortgage So one way or another, the other person is going to be included in your bankruptcy, because they're going to have to get notice, they're going to be on those debts. And they're going to want to know what you're doing with those debts. Because if you walk away from them, you wash your hands of those debts, the other person is going to be on the hook. So everybody's going to want to know, you know, what's going on. If you both happen to file together, you would have kind of sister cases, and you'd have, the trustee would then be looking at those to see who's paying for what, what are the assets, what are the combined, interests, and, and of course, you won't have the same attorney. Because that's, that's just not, you know, that's not something that would happen. But you can definitely have, have a path that that is, both of you filing a case after you have the divorce finished.
Steve Altishin 35:46
We're running out of time, I hate this. We're running out of time, this has been really cool. But I do have one last thing that's kind of nipping at me. And that is, I work with a lot of professionals who who kind of sometimes will say, "God, I wish I'd seen the divorce decree, before it was signed, just because I could give some input on my from my point of view as a professional." So if someone comes into you, and they're talking about filing, or maybe they're divorced, and maybe filing after I mean, do you ever do ever say you know, well, how you divide your property, how you do your settlement may have effect on your, on your bankruptcy? So, I'd like it'd be great, if you could, show me what it's gonna be I could give you some advice on that, or is that something that's kind of split apart completely?
Darin Wisehart 36:37
Well, you can definitely advise both ways. And a lot of times when people come in, talk to me before the family law event has happened before they file for the divorce, they they're going to go get their attorney or they already have their attorney, I can work with their attorney, to kind of review things and make sure that on the bankruptcy side, we're looking where we are. Now, of course, you know, in my, in my practice, I don't like playing the gray area too much. So I'm not going to, you know, if I look at a divorce decree, that's going to get to that finalized point, that's really the main point that I'm going to be concerned with, I want to make sure that it says, what's not going to affect our case. And so I'm going to, I'm going to review it. And typically, if it's been if it's been battled over, that resting spot is going to be somewhere that's going to be usable for me anyway, it's not going to be too too altered. But we do get situations where before that divorce decree is has been signed, somebody will come to me and say, "Okay, we're negotiating this, and we're doing a little horse trading here. And should I trade this part or this part?" And then I can say, "well, absolutely trade that part because I can protect this part, or because this situation is better for you." So it's always better cost a little more I know, it's it's got that kind of added where there's an extra hand in the pocket. And we try to be efficient with how we do it. But it's it's a necessary spending of money because it gets my eyes on this thing before it's signed before it's finalized. And if it can help you save you 1000s of dollars, then of course, it's worth your worth your money to have happen. And as we look at it, we can all make sure that we're working together, and I won't have my hands too deep on what's going on with the family law thing, but it's good to be able to review it before it's signed, for sure.
Steve Altishin 38:14
Oh, you would imagine, you would imagine. Well gosh, we are definitely out of time. Thank you so much, Darin for being here today. It is great insight on bankruptcies, divorces, how they intermingle, how they impact each other. And at the end of the day, why it's so important to have a good attorney from both areas, because there are there are separate, but also equal kind of issues going on. So thank you very much for today.
Darin Wisehart 38:45
Yeah, no problem. Thanks for having me.
Steve Altishin 38:47
You bet. We're gonna we're gonna look forward to talking to you and again, because I imagine there are many issues that can arise that are a Facebook live in themselves when it comes to bankruptcies and divorce.
Darin Wisehart 38:59
Absolutely. I look forward to it.
Steve Altishin 39:00
All right! Well, thank you everyone for joining us today. Anyone who has questions on today's topic, you can post them here we can get you connected right away with Darin. Until next time, stay safe. Stay healthy. Stay happy.
Outro:
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