Gitlin Law Blog

Bankruptcy, Part III

Q: My marital settlement agreement/divorce judgment requires my ex-spouse to pay certain debts incurred during the marriage.  Can he avoid liability for these debts by filing bankruptcy and will I become liable for these debts?
A: Obligations assumed in a divorce are not dischargeable under Chapter 7.  Therefore the debtor cannot avoid liability for these debts.  These debts, however, may be discharged under Chapter 13 if the debtor complies with the payment plan and has paid all support obligations in full.  Therefore, you may become liable for these debts despite the marital settlement agreement and the divorce.

Q: My marital settlement agreement/divorce judgment requires my ex-spouse to make payments to me as part of the property distribution.  How will these payments be affected if he files for bankruptcy?
A: These obligations are treated the same as the assumption of debts in a divorce.  Under Chapter 7, your former spouse cannot avoid these obligations, but may be able to avoid the obligations under Chapter 13 bankruptcy.

Bankruptcy Part II

Q: What are the different types of bankruptcy and what is the relevance to divorce cases?
A: Individuals can file for bankruptcy under Chapter 7 or Chapter 13.  Chapter 7 is a total discharge of debts whereas Chapter 13 is a repayment plan allowing the debtor to make payments over the course of time (5 years in many cases) and then have remaining debts discharged.  The type of bankruptcy (7 or 13) affects which debts can be discharged, if and when debts will be discharged, and the contents of the bankruptcy estate.  In relation to divorce, one difference is that property settlements contained in a divorce judgment (Marital Settlement Agreement) are no longer dischargeable under Chapter 7, but are dischargeable if certain conditions are met under Chapter 13.

Q: My ex-spouse just filed for bankruptcy.  Will this affect his obligation to pay child support and maintenance?
A: No.  In fact, child support and maintenance (referred to as domestic support obligations in the bankruptcy statute) receive priority treatment.  Therefore, under Chapter 7 property is first distributed to fulfill the support obligation, and under Chapter 13 the support obligation must be paid in full during the bankruptcy proceedings.  Under the new bankruptcy law, failure to pay current support obligations in full can result in denial of a discharge under Chapter 13.

Q: When my ex-husband filed for bankruptcy, he owed a substantial amount of child support.  How and when can I collect the past-due child support?
A: Support obligations, such as child support, are not dischargeable under Chapter 7 or Chapter 13.  The bankruptcy will not affect your ability to collect past-due support, but the automatic stay may prevent you from attempting to collect pre-bankruptcy-petition past-due child support from property in the bankruptcy estate, and a debtor’s income is part of the bankruptcy estate in a Chapter 13 bankruptcy.

 

Divorce & Bankruptcy Part I

Q: If I am contemplating filing for both divorce and bankruptcy, should I file one or the other first?
A: If you and your spouse have substantial debts, it may make sense to complete a joint bankruptcy before completing a divorce.  By discharging debts before completing the divorce, you can simplify the division and distribution of the marital property and avoid problems of possible future liability from debts assigned to your spouse in the event of his or her bankruptcy.  However, the decision is not necessarily an either-or choice.

Q: I’m in the middle of divorce proceedings and my spouse just filed for bankruptcy.  How will this affect the divorce proceedings?
A: When a party files for bankruptcy, an automatic stay becomes effective.  A bankruptcy estate is also created.  The estate includes all non-exempt property of the party petitioning for bankruptcy.  The automatic stay does not affect custody and visitation disputes or divorces except to the extent that division of bankruptcy estate property is at issue.  The divorce court does not have authority to divide property in the bankruptcy estate.  The divorce court retains authority to determine custody, visitation, child support and maintenance.  Therefore, bankruptcy proceedings can stall or delay the division of property in divorce proceedings.

Q:  How long does the automatic stay last?
A: Generally the automatic stay remains in place until the debtor receives a discharge in the bankruptcy case.  However, there are other significant limitations on the automatic stay which a debtor, or anyone seeking to avoid the automatic stay, should discuss with a bankruptcy attorney. 

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases

Divorce by Numbers (III)

11. Settlement.  Ninety-five percent of all cases are settled and do not go to contested trial.  The statistics for settlement of child custody cases are not as good.  The illustrated case of Mary and John ends in a settlement, but the results of the settlement will be (because they usually are) almost the same as the results of a trial.  The advice your lawyer gives regarding settlements is based on the lawyer’s knowledge of the law and the knowledge of how the judge is going to rule.  A settlement should not be considered by your lawyer until the lawyer knows and understands all of the financial and child custody facts.  The settlement is usually negotiated directly between the lawyers.  Sometimes the lawyers decide to hold a “four-way settlement conference,” that is a negotiating session in which both the lawyers and clients participate face to face.  I do not encourage four-way conferences.  I believe in most cases they are counter-productive, rather than productive because, for one thing, some lawyers “showboat” at these conferences.

12. Court Conducted Settlement Conference.  If the case is not sooner settled, the judge conducts a pre-trial settlement conference.  At this conference each lawyer submits to the judge a memorandum telling the judge all the essential facts of the case, proposing a settlement and attempting a justification for the proposed settlement based on the facts of the case and the law applicable to the case.  The parties and their lawyers are in court for the settlement conference, but usually only the lawyers go in the judge’s chambers (office) for the settlement conference.  The lawyers each present their position and arguments to the judge.  After this the judge will generally have a fair assessment of the facts of the case and the applicable law and the judge will usually tell the lawyers something to the effect of, “If this case goes to trial and the facts at the trial come out as I now understand the facts to be, then my ruling is likely to be . . .”  The judge’s pre-trial conference recommendations for settlement should be the blueprint for a settlement agreement unless your lawyer believes the judge misapprehended the facts, or misunderstood the law, and that at trial the lawyer can convince the judge to a different position, but going to trial against a judge’s recommendation is going to trial with the odds against you.

13. Settlement based on child custody evaluation.  At number 9 I commented on custody evaluations.  They are usually performed by a mental health professional appointed by the judge.  The evaluator, or investigator, submits a written report.  The written report will contain the facts pertinent to child custody issues, which is based on what is in the best interest of the children, and will usually, but not always, include a psychological assessment of the parties which is made on the basis of a clinical interview by a psychologist and psychological testing.  In a close case, the psychological evaluations will tip the scales.  Usually, but not always, the evaluator/investigator will make a custody recommendation to the judge.  The judge is not required to follow the recommendation, but in the majority of the cases the judge does, so the recommendation of a custody evaluator should be given considerable weight in deciding whether to settle the custody issue, or go to trial.  A sophisticated divorce lawyer will fully explain the evaluation/investigation process and prepare the client for this procedure.  In this case, as in all cases, knowledge is strength.

14. Finalizing the settlement.  Settlement is finalized by a written “Marital Settlement Agreement”.  In this case we will assume that Mary’s attorney makes the first draft of the settlement agreement which, after Mary’s approval, is presented to John’s lawyer, but it could well have been that it was John’s lawyer who wrote the first draft.  It will probably take Mary’s lawyer more than one draft of the proposed agreement for it to contain all of the terms that are satisfactory to Mary and her lawyer.  That draft of the marital settlement agreement will then be delivered to John’s lawyer and John and his lawyer will review the agreement and in most likelihood will ask for changes to be made so that the proposed agreement is acceptable to John.  This is part of the negotiations and is a back and forth procedure that may take some time before we have both Mary’s and John’s signatures on the agreement.

15. Finalizing – the prove up.  Once the marital settlement agreement is signed it is merely a matter of docketing the final hearing before your judge.  The hearing can usually be scheduled  within about a week of the time the lawyer calls the courthouse to schedule the hearing.  Usually only the plaintiff (in this case Mary) is required to attend the hearing and testify.  Before the divorce prove up Mary’s lawyer should inform her of the questions that will be asked of her.  The actual hearing (the time Mary will testify) will only last about five minutes, but since there will be other divorces being finalized in the same time frame, Mary should allow about an hour for the court appearance.  The questions to be asked of Mary will, first, be in order to prove the matters stated in the petition for divorce, which includes names and identities of the parties, the grounds for the divorce etc.  The questions will also deal with Mary’s understanding of the terms of the marital settlement agreement.  As soon as Mary finishes her testimony, her lawyer will present to the judge a proposed judgment of divorce, which the judge will sign.  Mary is then divorced and the marital settlement agreement is made part of the judgment.

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases

 

Bankruptcy and Divorce

My spouse just filed for bankruptcy.  Is this going to affect the divorce?
A: Yes.  When someone files for bankruptcy the property they own becomes part of the bankruptcy estate.  An automatic stay also begins.  The combination of the creation of the bankruptcy estate and the automatic stay will prevent the divorce court from distributing property that is part of the bankruptcy estate even if the property belongs to the marriage.

Q: What can be done during a bankruptcy?
A: Although a bankruptcy prevents the divorce court from acting on the property in the bankruptcy estate, it does not prevent the court from establishing and enforcing support orders.  Even if your spouse has filed for bankruptcy, the court can set child support and maintenance.  The court can even enforce child support and maintenance as long as the enforcement does not affect property contained in the bankruptcy estate.  The court can also make decisions and order about custody and visitation.  Income earned by the filer is not considered part of the bankruptcy estate in certain types of bankruptcy.

Q: What about filing bankruptcy together?
A: If the net value of the marital estate is negative, then you should consider filing bankruptcy jointly.  The net value of the marital estate is negative if the debts of the parties exceed the total value of the assets of the parties.  A bankruptcy may allow you and your spouse to discharge some debt and provide protection to certain assets.  Bankruptcy is complicated.  You and your spouse should consult a bankruptcy attorney to determine how a bankruptcy could reduce your liabilities and protect your assets.  If you file for bankruptcy together, the divorce can be completed after the bankruptcy is finished.

Q: My mortgage lender just filed for foreclosure.  Can a divorce or bankruptcy proceeding stop the foreclosure?
A: A divorce will not prevent a mortgage lender from moving forward with a foreclosure.  A bankruptcy will result in an automatic stay and therefore temporarily stop or delay the foreclosure.  However, the mortgage lender will be able to avoid the automatic stay after seeking the appropriate relief from the bankruptcy court if you do not remain current with your post-bankruptcy-petition payments on the mortgage.  There may also be other circumstances which would allow the lender to avoid the automatic stay.  If you have filed for bankruptcy, you should consult your bankruptcy attorney regarding the foreclosure proceedings.

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases

 

Debts During Divorce

Q: The court ordered my spouse in the temporary or final order to pay certain debts.  Why is the creditor suing me?
A: Temporary orders and the final judgment in a divorce can only affect the obligations of the parties to each other.  The creditor was not a party to your divorce and could not be made a party to your divorce.  Therefore the orders of the divorce court will not affect the creditor’s ability to collect the debt owed.  If it was a joint debt, the creditor can seek payment from either spouse, despite any orders of the divorce court.  The divorce judgment or the marital settlement agreement should provide that the party required to pay the debt will indemnify the other party.  If the other party then is required to pay the debt, they would be able to seek reimbursement from the party required to pay the debt in the divorce judgment.

Q: Can I be liable for joint debts?
A: Yes.  When a debt is jointly owed, the creditor may seek part or all of the payment for either or both debtors.  This is referred to as joint and several liability.  Under joint and several liability, liability is not apportioned proportionately among the joint debtors.

Q: Can the divorce judgment or marital settlement agreement require my spouse to pay debts?
A: Yes.  The marital settlement agreement or the divorce judgment can allocate responsibility for marital debts regardless of who incurred the debt.  The divorce judgment, however, does not affect the creditor’s right to collect from the party or parties incurring the debt.

Q: Could I end up paying for debts that are in my spouse’s name?
A: Yes.  The divorce judgment can allocate responsibility for debts without regard to who is the named debtor.  Even if your spouse is the debtor and the divorce judgment requires them to pay the debt, you could still be liable under the Rights of Married Persons Act.  The Act allows a creditor to bring a claim against the property of either party without regard for who incurred the debt if the other spouse agreed to be liable for the debt in writing or the expense is for goods or merchandise purchased by or in the possession of that spouse or former spouse or for services ordered by the other spouse or former spouse.

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases

 

Obligation for Orthodontic Treatment

This subject is sometimes addressed in marital settlement agreements and sometimes comes into play in post judgment proceedings when the custodian applies for the child support obligor to pay for the orthodontia for the child. The general rule in Illinois is that if the divorce judgment requires the noncustodial parent to provide medical insurance, hospitalization, dental and ophthalmology expenses for the child, he thereby, is not obligated to insure or cover expenses for the child’s orthodontic treatment. IRMO Jorczak,, 315 Ill. App. 3d 954, 248 Ill. Dec. 862, 735 N.E.2d 182 (4^th Dist. 2000)

A provision in a divorce decree, however, for maintaining dental insurance and payment of dental expenses does include orthodontic treatment. IRMO Mitteer, 241 Ill. App. 3d 217, 181 Ill. Dec. 534, 608 N.E.2d 2d 607 (4^th Dist. 1993)

WINNING

 

FACTS WIN, NOT LAWYERS

 

The best lawyer in the community will not win a case with bad facts.  A mediocre lawyer will win a case with good facts.

J

Money and Gambling are Causes for Divorce

Q: Are disagreements over money a significant cause for divorce?
A: Yes.  Money differences ARE among the top three causes for divorce.

Q: Where do you rank gambling as a cause for divorce? 
A: I see addictive gambling as a specific cause for divorce with increasing frequency, especially since the opening of the river boat casinos.  Gamblers Anonymous states that 16% of Illinois Gamblers Anonymous members were divorced due to gambling. 

Is there a cheap and simple way to get divorced?

Q: To save money, can a husband and wife have the same divorce lawyer?
A: No.  A lawyer cannot represent both parties to a divorce even though you frequently hear that it is done. But, while the parties believe that a lawyer is representing both of them, a close look will show that the lawyer actually only represented one of the parties.  It is Biblical and it is true: “A servant can only serve one master.”

Q: How can I employ a lawyer/law firm and keep the costs down?
A: The way to keep fees down in a divorce proceeding is for you and your spouse to agree to the basic terms of a divorce.  A lawyer, in an initial consultation, should be able to inform you of what the essential issues are to which you and your spouse must agree.  Equipped with that advice, if you and your spouse can agree to terms, the divorce can be simple and inexpensive.

As in all areas of delivery of professional services, the most expensive element is the services of the professional.  For example, delivery of health care services by a physician is more expensive than the delivery of health care services by a technician, or nurse.  The parallel for legal services is if some of the services in a divorce can be delivered by a paralegal employee of the lawyer.  Where the assets of the parties are not difficult to evaluate, and the incomes are straightforward, that is, hourly or salaried, much of the work can be done by the lawyer’s paralegal.   My firm  has found that utilization of a paralegal in a simple asset, simple income case, leads to a savings of about 50% in the delivery of professional services.