I. The Automatic Stay Stops Divorce Court From Dividing Your Property Rights
When you file bankruptcy, the automatic stay that goes into effect in your bankruptcy case stops the divorce court from proceeding to divide your property rights between you and your spouse. For the divorce court to proceed, the bankruptcy court must issue an order granting relief from the stay, either by agreement of the bankruptcy trustee and the spouse that filed the bankruptcy petition, upon a motion filed in bankruptcy court by one of the spouses.
Generally, if you have any assets that are not exempt under bankruptcy law, the bankruptcy trustee will not agree to relief from the bankruptcy stay, and will oppose any motion for relief from the stay. The bankruptcy trustee is charged with administering for the benefit of your creditors the non-exempt portion of the assets in your bankruptcy case, considered property of your bankruptcy estate. If the bankruptcy trustee cannot determine that all your assets are exempt from the claims of your creditors, he or she will oppose lifting the automatic stay to allow the divorce court to proceed.
II. Filing Bankruptcy Changes How The Divorce Court Can Assign Marital Debts Between You And Your Spouse
When you file bankruptcy, the divorce court loses the power to assign debt to you in your divorce case, especially if you receive a discharge of your debts in your bankruptcy case before the divorce court is allowed to proceed. Because the bankruptcy discharge wipes out your personal liability of the debts that are discharged in your bankruptcy case, the divorce court has no power to reimpose personal liability to you in your divorce case.
III. In The Miami Valley, Most Divorce Courts Will Not Proceed Until Relief From The Stay Is Granted
Because of the restrictions imposed by the automatic stay of bankruptcy, most divorce courts in the Dayton area, including Montgomery County and surrounding counties, will not allow the divorce proceedings to go forward until the order from the bankruptcy court granting relief from the automatic stay is issued and presented to the divorce court. In order for you to proceed with your divorce case, you must request your bankruptcy attorney to prepare an agreed order for relief from stay, or have your divorce attorney prepare a motion for relief from the stay for filing in your bankruptcy case. Since most divorce attorneys do not practice bankruptcy law, you will most likely need to have your bankruptcy attorney prepare the necessary papers to gain approval of the bankruptcy court for you to proceed with your divorce case.