Bankruptcy and Family Law: What You Should Know

Are you in a position where you need to file for bankruptcy? If so, are you concerned about how this will impact your family, especially your children?

In today’s financially constrained economy with rapidly increasing prices of goods and lagging pay increases, it is increasingly becoming challenging to survive without going into debt. This, in turn, leads the risk of needing to file for bankruptcy.

Statistics show that 38% of people living in the USA filed for bankruptcy in 2017. This figure is up from 38% in 2016 and 25.98% in 2015. Thus, by looking at these statistics, it is evident that the number of non-business bankruptcy filings is increasing by the year.

Also, money is one of the most emotion-packed issues in any marriage. Therefore, it stands to reason that a marriage can end due to one of the parties filing for bankruptcy, especially if the reason for bankruptcy is due to gross financial mismanagement or wasting money on activities like gambling.

Bankruptcy: A succinct definition

Before we look at the impact bankruptcy can have on families, a couple’s marriage and any children born during the union, let’s look at what bankruptcy is and what is required to file for bankruptcy.

According to, “bankruptcy is a legal term for when a person or business cannot repay their outstanding debts.” And, the bankruptcy process is designed to forgive the debtor’s debt that can no longer be serviced.

What about the creditor’s right to be paid in full?

While it is true that the creditor will lose money when the debtor is declared bankrupt. However, the bankruptcy procedures allow for the creditor to receive a certain percentage of the outstanding monies. This amount is usually determined by the bankruptcy court.

Bankruptcy and the marital union

Unfortunately, as mentioned above, one of the side effects of bankruptcy is the end of a marriage. It also adds various complexities to the divorce process and the bankruptcy declaration.

There are many reasons for this; the most apparent one is the fact that bankruptcy is handled in a federal court, while the divorce is granted in a state court. Therefore, it is vital to hire a Galveston family lawyer to advise and manage the family law side of both events.

In summary, declaring bankruptcy cannot be used as a means to avoid paying child or spousal support. However, the following aspects also need to be taken into account when attempting to manage the divorce and bankruptcy proceedings together:

  • The bankruptcy filing brings all other court proceedings against the debtor to a halt. This includes the divorce.
  • If the debtor and his/her spouse are married according to the Community Property laws, most of the property and assets accrued during the marriage are added to the bankruptcy estate.

Final thoughts

It is clear from this discussion that proceeding with both the divorce and bankruptcy filings at the same time can be fraught with complications. Therefore, should you find yourself in this situation, it is vital to approach legal experts in both the family law and bankruptcy field to ensure that both these matters are managed correctly. And the outcomes will be in your best interest.