How to file divorce in Virginia after one’s spouse files bankruptcy.
You may be able to file for divorce in Virginia after your spouse files bankruptcy, depending on the type and timing of the bankruptcy proceeding, but you should not attempt to divide your property or allocate your debts through the equitable distribution process or by a separation agreement or property settlement agreement without first obtaining relief from the automatic stay in a pending case such as a chapter 13 bankruptcy case. The automatic stay that goes into effect as soon as a bankruptcy case is filed protects property of the bankruptcy estate and the debtor from collection efforts of his or her creditors holding prepetition claims. Those creditors may include the spouse of the debtor. A spouse may have a claim against a spouse in bankruptcy due to the existence of joint debts, a right to contribution, and rights incidental to the marital relationship, including a right to support and the rights to a division of marital property and allocation of marital debts through the equitable distribution under Virginia Code Section 20-107.3.
The automatic stay in bankruptcy found in Bankruptcy Code Section 362 does include exceptions for certain family law cases such as the establishment of paternity, the establishment or modification of a domestic support obligation (as defined in 11 U.S.C. 101(14A), a proceeding to collect a domestic support obligation from property that is not property of the estate, a proceeding concerning child custody or visitation, a proceeding regarding domestic violence (such as a protective order), or a proceeding for divorce or the dissolution of the marriage provided the case does not seek a determination of the division of property that is property of the estate. Nevertheless, settling one’s marital obligations with a separation agreement or property settlement agreement, or litigating the typical contested divorce case usually involves actions that could be considered a violation of the automatic stay. Any action taken in violation of the automatic stay is void or of no effect. Consequently, the prudent course of action is to first seek relief from the automatic stay in order to ensure that your separation agreement or property settlement agreement is valid or your equitable distribution award will not be disturbed.
While most chapter 7 cases are pending for only a short period of time, usually four to five months, a chapter 13 case may last three to five years. Thus, while a spouse may choose to simply wait for the conclusion of a chapter 7 case (or 180 days if advisable under 11 U.S.C. 541(a)(5)(B)) before signing a separation agreement or proceeding with equitable distribution in Virginia, a spouse of a debtor in a chapter 13 case faces a potentially much greater delay. In addition, under Bankruptcy Code Section 1306, property of the estate in a chapter 13 case includes property that the debtor acquires and earnings from service performed during the case. In all cases, the spouse of the debtor spouse should consult with a lawyer to protect that spouse’s rights in the bankruptcy case.
Relief from the automatic stay may be obtained in the U.S. Bankruptcy Court for the Eastern District of Virginia (EDVA) by filing a Motion for Relief from the Automatic Stay along with a Notice of Motion and Notice of Hearing. The website for the EDVA has a court calendar for each of the two judges that lists regular hearing dates for Motions, including Motions for Relief from Stay. The EDVA website also includes a number of bankruptcy forms for use in a Virginia bankruptcy, including a model Notice of Motion form. After obtaining the appropriate hearing date, a movant would file the motion and notice, along with a proposed written order, and pay the filing fee to the clerk of court. The motion, notice and proposed order should be mailed to the debtor spouse, the trustee appointed in the case, all creditors, and all parties in interest.
On the hearing date, the U.S. Bankruptcy Court for the Eastern District of Virginia will use a pre-call docket system in which all cases on the docket are first called by a clerk to determine if the matter requires a judicial determination. Most cases are continued by agreement or resolved by agreement on the pre-call docket. The few cases for the judge to hear, including your Motion for Relief from Stay, will be called in sequence after the judge takes the bench. Usually, no one files an objection to the motion or shows up in opposition to the motion on the hearing date, which gives the non-filing spouse the opportunity to persuade the judge to grant his or her motion for relief unopposed.
After the judge grants relief from the automatic stay in court, the successful moving party must then submit a written order reflecting the judge’s decision for the judge’s signature (hopefully your proposed order). With the issuance of the court’s written order, the non-filing spouse can then safely proceed with equitable distribution or the negotiation and execution of a separation agreement or property settlement agreement. You may need to obtain the court’s approval of any separation agreement or property settlement agreement. In addition, your attorney may need to obtain prior approval of employment of counsel before starting the process and approval of any fees paid, depending on the source of payment.
You should consult with your Virginia bankruptcy law and divorce law attorney or Richmond divorce lawyer James H. Wilson, Jr., to discuss whether you should seek relief from the automatic stay in your spouse’s bankruptcy case in order to execute a separation agreement or property settlement agreement or pursue equitable distribution in your Virginia divorce case.