Divorce during Bankruptcy

by Andy Miofsky, Illinois Bankruptcy Attorney

One of the leading causes of marital conflict involves money, or lack thereof.  If you and your spouse filed a joint bankruptcy and you are now considering divorce, your respective financial positions may be at odds with each other.  One person may want the house, one may not.  Both may want the same vehicle.  Who will pay, who will not.  Think about that for a moment, if you cannot agree to get along in marriage, will you be able to agree to do the things necessary to complete your case after you divorce.  This situation places the attorney squarely in a potential conflict of interest between both spouses.  An attorney cannot serve two masters.

Conflict resolution

This conflict does not exist if only one spouse is represented in bankruptcy unless the attorney also has an attorney client representation arrangement with the other spouse on some other matter.

In a joint bankruptcy case, the attorney represents both parties.  That attorney cannot ethically pick and choose sides or plan strategy favoring one client against the other.  Even if you only want a simple question answered, a conflict of interest prevents the attorney from providing one spouse advice that could hurt the other spouse.

So what do you do?  In order to get answers on how a divorce affects you and whether you should stay in bankruptcy or convert to another form of bankruptcy or whether you should split [deconsolidate] the one joint case into two individual cases, you and your spouse will need to consult separate attorneys, on your own and by yourself.

If you deconsolidate the joint case into two separate cases, one person might choose chapter 7 and one person might choose chapter 13; both might select the same chapter; or one, or both might dismiss the case.  Because there are so many options, some attorneys will automatically withdraw to avoid a natural conflict of interest.  If you find it favorable to finish the existing case and you and your spouse can do so in agreement, your bankruptcy attorney might continue to represent you both, provided both clients knowingly waive any potential conflicts of interest in writing.

Your bankruptcy attorney is only able to stay on as attorney in the bankruptcy case so long as the two spouses act in agreement on all decisions.  However, should either of you disagree on the way the case is handled, the attorney will be forced to resign, and you will need to hire separate attorneys.

Further, your attorney will not want to discuss matters outside the presence of either of you.  That means that individual phone calls will probably not be returned and communication will most likely only occur in each other’s presence or by letter or email copied to each person.  Cooperation will be the key to a successful bankruptcy involving spouses who divorce.

Thanks to Bankruptcy Law Network.