Chapter 13 bankruptcies can be a wonderful tool to get your life back in order when everything seems lost. A Chapter 13 bankruptcy can allow you to re-organize your secured debts and still wipe out unsecured debts like medical bills and credit cards.
However, Chapter 13 bankruptcies must last a minimum of 36 months unless all of your debt is being paid back (which is pretty rare). They can go as long as 60 months. So, nearly all Chapter 13 bankruptcies last between 3 years and 5 years. A lot can happen during that time – namely “life”, life happens.
Unfortunately, it is common to see a couple in the midst of a Chapter 13 bankruptcy decide to separate and divorce. When this happens, there are several options to consider. First off, even though you might be mad at your spouse, keep in mind it is still the two of you against your creditors. Rarely is there a situation where you and your estranged spouse are not better off working together to finish up your bankruptcy.
You can elect to finish your Chapter 13 bankruptcy plan payments together, just as if you had never gotten a divorce. Also, you can elect to “deconsolidate” your Chapter 13 case and both stay in your own, separate Chapter 13 cases. Also, you could deconsolidate and one or both of you convert to Chapter 7 bankruptcy after the deconsolidation. Lastly, you could elect to voluntarily dismiss your case and re-file new, separate cases.
Each case has unique circumstances, and it really just depends. One thing you might not see coming though, is that your current bankruptcy attorney may elect to declare a conflict of interest due to the divorce and may ask the Court to allow him or her to withdraw completely from representing either of you. If this occurs, you need to seek new counsel. Although there is a conflict of interest, as stated above, generally you and your ex-spouse may have very closely aligned interests since you are both going against your creditors.
It is possible to waive a conflict of interest to allow the same attorney to represent both debtors in this situation. We have done this many times, but it is a very strict requirement that BOTH spouses understand the potential conflicts involved and fully waive those conflicts.
By Jeff Wagoner, W M Law President
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