Equitable Distribution and Community Property

• Equitable distribution (ED) and community property are two systems under which states divide marital property and debt. Once a party obtains a bankruptcy discharge in Chapter 13, the other party cannot litigate property and debt division against him. While she incurs no liability on debts in his name solely, she becomes solely responsible for all joint debts even if a consent decree distributes the debts to the bankrupt party. Recent changes to the bankruptcy law have mitigated this effect in Chapter 7 bankruptcy cases. Chapter 7 allows a discharge of responsibility on joint debt to the creditor, but not to the other party.
  
  

Child Custody and Child Support

• Neither Chapter 13 nor Chapter 7 bankruptcy has any significant effect upon child custody or support. The automatic stay that goes into effect upon a debtor's initial bankruptcy filing will not stop the institution or maintenance of a custody or support case, nor will it stop an action to collect past-due support from the debtor's assets that aren't property of the bankruptcy estate. In addition, a party's bankruptcy will generally not serve as a basis for modifying the custody provisions of a consent decree. It may, however, justify a review of child support due to the increased liability suffered by the non-bankrupt spouse.
  
  

Alimony Cases

• The factors family courts take into consideration in making alimony awards vary from state to state, but the dependent spouse's need for alimony and the supporting spouse's ability to pay are two critical factors in any alimony award. In determining need and ability to pay, courts will usually consider, among other things, the debt burdens carried by each party. If one party or the other obtains a bankruptcy discharge, he reduces the debt burden that increased need or reduced ability to pay. If a party discharges a joint debt, and the other party does not join in the bankruptcy, the creditor can pursue collection from the non-bankrupt spouse; this reduces ability to pay but increases need.
  
  

Modification of Decree

• Although all issues may have been settled by a consent decree, a party's bankruptcy can provide the other side with a basis to re-open the case. A court may decide to set aside an equitable distribution or community property decree, allowing a party who may have waived her claims against the bankrupt spouse's retirement accounts to assert them anew. A court may also find the bankruptcy to constitute the changed circumstances necessary to modify an alimony award due to its effects on the dependency analysis.