Will It Hurt Your Custody Case If You File Bankruptcy?

A divorce, paternity case, or custody modification can quickly get expensive. After you pay your attorney's bill, your case may still involve fees for guardian ad litem services, court-ordered psychological testing, or parenting classes. These unexpected expenses lead some parents to consider filing for bankruptcy during a custody case, but they worry that doing so may make them look irresponsible in the judge's eyes. Here are X factors to consider before you submit a bankruptcy petition during a family law case.

Bankruptcy Goes Through Federal Court

You can file a Chapter 7 or Chapter 13 bankruptcy petition in your own state, but it's actually a federal matter. That means your bankruptcy case is submitted through federal courts rather than the local legal system, so records aren't easily accessible, even if your state uses a digital docket for other types of cases. If you're not married, your ex may not realize you've filed for bankruptcy unless opposing counsel specifically asks about it during depositions, the discovery process, or trial. However, talk to a divorce lawyer before filing for bankruptcy if you're still legally married to the other party in your child custody case.

Bankruptcy Can Affect Legal Fees

When you file for bankruptcy, you must provide a list of all debts owed, including debts to a lawyer, guardian ad litem, or judge. You don't have to list these expenses if you currently have a $0 balance, but you must submit them if you don't. The court notifies all debtors, including your attorney and other legal professionals, that you have an active bankruptcy petition. This may create a problem for you if you aren't current on legal fees.

You may also experience issues in bankruptcy court if your attorney or guardian ad litem fees are viewed as preferential debts. Preferential debts refer to payments made shortly before filing bankruptcy. The court may argue that you had money to pay your lawyer's retainer but willingly chose not to pay your credit card debts. This is a problem because the bankruptcy trustee can argue that you must undo and recover preferential debt payments, which means your legal bills are no longer paid. As a result, your attorney may withdraw from your case, or the guardian ad litem may strike your pleadings.

Bankruptcy Might Make You Appear Financially Unstable

Judges do not always consider your income or resources when determining child custody arrangements, but personal finances often play a role. Having an active bankruptcy petition during a custody case may not impact your trial's outcome, but it's hard to predict how a judge might view your actions. An experienced family law attorney can help you find ways to justify the bankruptcy or spin it in your favor before your child custody trial. Consult with a reputable family law attorney before you file bankruptcy, as you may find it beneficial to wait until your custody case ends.

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