When a bankruptcy is filed, people you owe money to (creditors) must stop trying to collect on a debt. A bankruptcy also prevents creditors from starting most new collection actions against the person filing bankruptcy. This is all thanks to one of the most powerful parts of the bankruptcy code, the automatic stay.

Under Section 362 of the United States Bankruptcy Code, the automatic stay begins as soon as your bankruptcy is filed. Any debts incurred after the bankruptcy is filed are considered post-petition debts and are not included and impacted by the automatic stay.

When you file a bankruptcy and are in the process of getting a separation or divorce, or are recently divorced, there may be some complications with the different actions throughout that separation. Knowing when an automatic stay applies and what impact that may have on matrimonial actions is important. So, let’s take a look at the more common post-separation actions and how they are impacted by a bankruptcy.

An action only seeking a divorce is not changed or stopped by the filing of a bankruptcy. Things can continue forward as if the bankruptcy had not been filed.

Bankruptcy does not stop a paternity action from being filed or continuing.

Bankruptcy does not stop actions for child support or alimony or the collection of child support or alimony for assets not considered to be part of the bankruptcy estate. If a separated or ex-spouse is trying to collect against property that is part of the bankruptcy estate then they would need to seek relief from the automatic stay. Child support and alimony are commonly referred to as domestic support obligations or DSOs.

This is where the bankruptcy’s automatic stay will have the biggest impact. Equitable distribution is when there is a division of property and/or debt obligations between couples during a divorce. Property the debtor (person filing the bankruptcy) has an ownership or legal interest in is considered property of the bankruptcy estate. Therefore, there would need to be relief from the automatic stay sought to go through the equitable distribution process.

But what if the parties have already determined equitable distribution and have a separation agreement laying out those terms?

If equitable distribution has already taken place and is memorialized by a separation agreement, the spouse who filed the bankruptcy is required to continue paying domestic support obligations (DSO). Nothing would change.

However, if there are non-domestic support obligations (such as one spouse agreeing to pay specific debts) the spouse who filed a bankruptcy may not be required to pay back those debts. It depends on the type of bankruptcy that has been filed. If a Chapter 13 bankruptcy is filed then the spouse who filed the bankruptcy would not be required to continue to pay these non-DSO payments as laid out in a separation agreement. If they filed a Chapter 7 bankruptcy they would have to continue to follow the separation agreement.

Therefore, there could be times where it would, otherwise, make sense to file a Chapter 7 bankruptcy where a Chapter 13 bankruptcy would actually save a debtor more money by allowing them to void the part of the separation agreement requiring them to pay back non-domestic support obligations.