Coronavirus Update

In response to rapidly developing public announcements related to Coronavirus, Cage & Miles can support consults and cases remotely due to our cutting edge technology for all employees and our cloud based firm management system. Our people can work remotely on all facets of client cases. In the unfortunate event that one or more of our people are exposed to the virus, our clients’ work does not need to stop. All client files are uploaded, secured and safely backed up on the cloud. We have contingency plans in place at our two offices to see that correspondence from the court, case professionals, opposing counsel, and service providers gets uploaded to our clients’ secured cloud file so our people can work remotely. We are ready, willing and able to keep your case moving forward during these uncertain times. Please contact us if you have questions about how public announcements affect your case.

How Does Bankruptcy Affect Divorce?

Often times dissolution of marriage and bankruptcy go hand in hand because one or both spouses may not be able to pay the marital debts, or one spouse seeks to use bankruptcy as a weapon to him or her an advantage after the divorce proceedings. Section 523(a)(5) of the Bankruptcy Code now makes all support obligations non-dischargeable in all chapters.

If a spouse filed for bankruptcy during the divorce, the family court still has discretion to issues relating to child support, spousal support, and attorney’s fees. However, the Court is required to “stay” the proceedings, and cannot make orders regarding marital property, division of assets, apportion of any stocks or mutual funds, or distribution of retirement funds until the Bankruptcy proceedings are over.

In general, filing for bankruptcy will not affect your spouse’s separate property, but it can affect your marital community property. The creditor can come after the portion of assets that is community or the bankrupt spouse’s separate property. It is important if you are aware that your spouse is going to file for bankruptcy that you keep your IRA and 401(k) plans separate. In many states, IRA’s are exempt and EISA plans are also protected if their documentation contains spendthrift protection. Also, in California, a life insurance’s cash value exemption is capped at a certain amount, provided you meet the requirements.

The California Bankruptcy Court recently declared obligation to pay attorney’s fees are also non-discharable debts pursuant to 11 U.S.C. Section 523(a)(5). If a spouse attempts to discharge an attorney’s fee award, it is imperative that the other spouse files an adversary proceeding with the Bankruptcy Court. This is also true if your spouse attempts to discharge community debts such as credit cards or loans. If the non-filing spouse does not file an objection, it could mean that the filing spouse is able to discharge a debt that negatively affects your credit.

For questions related to Bankruptcy and Divorce, call Cage & Miles, LLP at (858) 376-7251.

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