Sherman Oaks Bankruptcy During Divorce Lawyers
Filing bankruptcy while your divorce is pending is not two separate cases that happen to overlap; each one changes what the other can do. The automatic stay freezes some parts of a divorce and leaves others untouched, and a debt-division order in a marital settlement agreement does not bind your creditors the way most people assume. Bankruptcy during divorce requires careful sequencing, and the order you do things in can decide who ends up owing what. Wadhwani & Shanfeld is a consumer bankruptcy and debt relief law firm that handles Chapter 7, Chapter 13, debt settlement, and foreclosure defense for individuals and families in Sherman Oaks and across the San Fernando Valley and Southern California.
The questions we hear from people in this position are practical ones. Who is responsible for the joint credit cards once the divorce is final? Does the house have to be sold? Will a spouse’s bankruptcy drag the other spouse’s property into the case? Can support obligations be wiped out? Some of these have clear answers under federal bankruptcy law and California exemption rules, and some depend on timing and on how your settlement agreement is written.
How a Pending Divorce and a Bankruptcy Filing Interact
When a bankruptcy petition is filed, the automatic stay halts most collection activity, including lawsuits, wage garnishments, bank levies, repossessions, and foreclosure proceedings. In a divorce, the stay is not a blanket freeze. Courts generally let the family law case move forward on the dissolution itself, on custody, and on the establishment or collection of support, while the property division and any creditor-related relief tend to get tangled up. Which pieces pause and which proceed depends on the specifics, which is why filing without coordinating with your family law attorney can create delays and surprises.
The deepest trap is the difference between who owes a debt as between spouses and who owes it to the creditor. A divorce judgment can order your former spouse to pay a joint credit card, but the card company was never a party to your divorce. If the account is in both names, the creditor can still pursue you when your ex stops paying. A bankruptcy discharge can cut off your personal liability on that account, but your ex’s discharge, if they file, does not automatically clear yours. Planning both sides together is how you avoid being left holding a debt the divorce decree said was someone else’s.
Why Choose Wadhwani & Shanfeld for Bankruptcy During Divorce
Founding shareholders Raj Wadhwani and Greg Shanfeld bring more than 90 years of combined legal experience to cases that are rarely simple. Raj Wadhwani, a Southwestern Law School graduate, helped pilot the Best Case Bankruptcy software in 1998 and was the first attorney to file a bankruptcy case electronically in the Central District of California. Greg Shanfeld, a University of Southern California law graduate, has handled more than 10,000 bankruptcy cases over three decades.
That depth matters in a divorce-related filing because the work is mostly about judgment calls: whether one spouse should file alone or both should, whether Chapter 7 or Chapter 13 fits the household’s income, how California’s exemptions apply when assets are about to be divided, and what to do if a creditor has already sued. The firm files in every division of the U.S. Bankruptcy Court for the Central District of California and serves clients in Sherman Oaks, Van Nuys, Encino, Woodland Hills, and throughout Los Angeles, Orange, Riverside, and San Bernardino Counties.
You can speak directly with an attorney from your first call, and the first consultation is free. Cases can be handled entirely by phone, email, video, and online chat, with 100% virtual consultations available, which is useful when you and your spouse are living apart or when your schedule is already stretched by court dates. When a garnishment, foreclosure sale, or repossession is days away, the firm moves fast.
Debt Situations That Come Up When a Marriage Ends
- Joint Credit Card Balances: Both spouses are liable to the issuer regardless of what the divorce judgment says about who pays. Chapter 7 can discharge your share of qualifying unsecured balances, and the timing relative to the divorce decides whether a creditor can come after you later.
- The Family Home and Mortgage: One spouse keeping the house usually means refinancing or assuming the loan, which is hard on a single income. Chapter 13 can help someone behind on the mortgage keep the home and catch up over three to five years, and a wholly unsecured second mortgage may be removable.
- Debt Awarded to You in the Settlement: When a marital settlement agreement assigns a large share of debt to one spouse, bankruptcy can sometimes eliminate that burden, but obligations in the nature of support are treated differently from ordinary property-division debts.
- Child Support and Spousal Support Arrears: These generally cannot be discharged in Chapter 7. A Chapter 13 plan can give you a structured way to catch up on arrears while remaining protected from enforcement.
- Vehicle Loans and Repossession: If a car is in both names or the paying spouse has moved out, payments get missed. Bankruptcy halts repossession, and a Chapter 13 plan can reorganize the loan.
- IRS Tax Debt on Joint Returns: Spouses who filed jointly are typically both responsible for the balance. Some older income tax debt can be discharged if it meets specific timing rules, and we also represent clients before the IRS to stop levies and arrange payments.
- Creditor Lawsuits and Wage Garnishment: Divorce often triggers missed payments, and collection suits follow. A filing stops lawsuits, judgments, and garnishments the moment the petition is submitted.
- Small Business Debt: If one spouse owns a business, its debts and personal guarantees complicate both the divorce and the choice of bankruptcy chapter.
What to Do Right Now If Your Marriage and Your Finances Are Both Coming Apart
Start by getting the facts on paper. Pull your most recent credit report, and list every account, noting whether it is in your name alone, your spouse’s name alone, or both. Collect pay stubs, tax returns, mortgage and car loan statements, and any court papers from the divorce, including the petition, any temporary orders, and drafts of a settlement. If a collector has sued you, find the date you were served; your response deadline is short, and an expired deadline lets a court enter judgment against you.
Then talk to a bankruptcy attorney before you sign a marital settlement agreement. This is the single most common mistake. Once a settlement is signed and a judgment entered, its terms on debt and property can be hard to unwind, and language that looks harmless to a family law judge can create problems in bankruptcy. Ideally your bankruptcy attorney and your divorce attorney talk to each other early.
Know where your case would be filed. Bankruptcy petitions are filed in the U.S. Bankruptcy Court for the Central District of California, and the division is set by your home zip code. Sherman Oaks is served by the San Fernando Valley Division, which sits in Woodland Hills. Your divorce, meanwhile, is heard in the Los Angeles County Superior Court, and the two courts operate independently. A bankruptcy trustee will examine your income, expenses, and property, including anything you transfer or give up during the divorce, so do not move assets, sign over titles, or pay off one creditor in a hurry without advice. Transfers made close to filing can be unwound.
Finally, watch the clock on anything urgent. If a foreclosure sale is scheduled, remember that California law lets you reinstate a monetary default up to five business days before the sale, and a bankruptcy filing stops the sale immediately. If your paycheck is being garnished, a filing can end it right away. If your car has been repossessed, the lender generally has to give written notice before selling it, and you may have a short window to redeem or reinstate. Call us before those windows close.
Choosing Between Chapter 7 and Chapter 13 When a Divorce Is Underway
Divorce changes your income picture, and the bankruptcy chapter you qualify for turns on that picture. Chapter 7 requires passing the means test, which compares household income to the California median for your household size and then accounts for actual expenses. Whose income counts, and how many people are in your household, can shift once spouses separate, so the timing of the filing relative to the move-out date and any support orders matters. Chapter 7 usually wraps up in about four months and eliminates qualifying unsecured debt like credit cards, medical bills, and personal loans.
Chapter 13 is built for people with steady income who need structure. If you are keeping the house in the divorce and are behind on the mortgage, or you owe support arrears or priority taxes, a three to five year plan lets you catch up while creditors are bound by the confirmed plan. It also suits people whose income is above the Chapter 7 limits.
Exemptions deserve special attention because a divorce is also a division of property. California does not use the federal exemption scheme; you choose one of two state systems for the entire case, and you generally must have lived in California for at least 730 days to use them. One system carries a homestead exemption tied to local home prices, which often favors homeowners with real equity. The other offers smaller set amounts for a residence and a vehicle plus a wildcard that frequently works better for renters. Because the home and vehicles are often the largest assets being split, the choice of system should be made with the divorce settlement in view. Most of our clients keep everything they own, but that outcome comes from planning, not luck.
Questions About Bankruptcy and Divorce
Should I file bankruptcy before or after my divorce is final?
It depends on what you owe, what you own, and what your settlement says. Filing first can stop collection activity and may eliminate debts before they are divided. Filing after can be better if the divorce will change your income or household size in a way that affects which chapter you qualify for. There is no universal answer, which is why the sequencing should be reviewed before you sign anything.
Does filing bankruptcy stop my divorce?
No. The automatic stay does not generally prevent the court from dissolving the marriage or handling custody and support. Some property-related issues may be affected, and a bankruptcy trustee may take an interest in assets that are part of the estate, so coordination between your lawyers is important.
If my divorce judgment says my ex pays a joint debt, am I off the hook?
Not as far as the creditor is concerned. The creditor was not part of your divorce, and if your name is on the account, the creditor can still collect from you if your ex does not pay. A discharge of your own liability is one way to protect yourself.
Can bankruptcy erase child support or alimony?
Generally no. Child support, alimony, and similar support obligations cannot be discharged in Chapter 7. Chapter 13 can help you catch up on arrears over the life of a plan, but the obligation itself continues.
Do both spouses have to file?
No. One spouse can file alone, and during a divorce that is common. Whether to file jointly, individually, or not at all depends on who holds which debts and what you want to accomplish. If your spouse does not file, creditors may still pursue them on joint accounts.
Will I lose my house if I file during a divorce?
Most of our clients keep their homes. In Chapter 7, the question is whether your equity is protected by California’s homestead exemption. If you are behind on the mortgage or have more equity than the exemption covers, Chapter 13 may let you keep the property and catch up over time.
Can I file if my spouse and I are separated but not yet divorced?
Yes. You can file while separated or while the divorce is pending. How your household is counted for the means test and how marital property is treated may differ from what you would expect, so it is worth reviewing the specifics before filing.
What if my ex ran up debt I did not know about?
Debts incurred during the marriage may be treated as community obligations, even ones you did not know about. Pull a current credit report to see what is out there, and talk to an attorney about whether you can discharge your share or whether the debt belongs to your spouse alone.
Can a transfer of property to my spouse in the divorce cause problems in a later bankruptcy?
It can. A trustee can look at property transfers made in the period before filing, and giving up assets for less than they are worth may be challenged. That is one reason to discuss any planned transfers with a bankruptcy attorney before they happen.
Will my spouse find out I filed?
If you are still married and have joint accounts or file taxes jointly, a spouse will often learn of a filing because joint creditors are notified and shared debts are affected. Being upfront with your attorney about the situation lets us plan around it.
What if I am being sued by a creditor while my divorce is pending?
Do not ignore the lawsuit. An expired statute of limitations is a defense you must raise in a written answer, or the court can still enter judgment. Bankruptcy halts the case when filed, and we can explain whether to answer, negotiate, or file.
Serving Sherman Oaks Bankruptcy Clients and the Surrounding Region
We represent people going through divorce and debt trouble in Sherman Oaks, and in nearby San Fernando Valley communities including Van Nuys, Encino, Woodland Hills, Reseda, Northridge, Granada Hills, North Hollywood, North Hills, Mission Hills, San Fernando, and Sylmar. Clients also come to us from Hollywood, Santa Monica, and the Westside, as well as from Los Angeles, Santa Clarita, Long Beach, Lakewood, Torrance, Compton, and Inglewood.
Our reach extends across Los Angeles County to Lancaster, Palmdale, Acton, and the Antelope Valley, and into the eastern San Gabriel Valley and Inland Empire, including Ontario, Rancho Cucamonga, Upland, Fontana, San Bernardino, Pomona, Chino, Chino Hills, Montclair, Claremont, Glendora, West Covina, Riverside, and the Coachella Valley. In Orange County, we help clients in Anaheim, Santa Ana, Garden Grove, Buena Park, Fullerton, Huntington Beach, Westminster, Costa Mesa, Newport Beach, Tustin, La Habra, Placentia, Mission Viejo, and Laguna Niguel, along with Norwalk, Bellflower, Paramount, Gardena, Cerritos, Cypress, Signal Hill, and Huntington Park.
Talk With a Sherman Oaks Bankruptcy Attorney Before You Sign Your Divorce Settlement
If you are in the middle of a divorce and the debt is piling up, a conversation with a Sherman Oaks bankruptcy attorney can show you which accounts you can walk away from, which ones you cannot, and what to avoid before the settlement is final. Call Wadhwani & Shanfeld for a free consultation and speak directly with an attorney about your situation, whether you meet in person or handle everything remotely by phone, video, email, or online chat.
We will go through your income, property, and debts, explain your options inside and outside of bankruptcy, and tell you honestly which path makes sense. If a garnishment, foreclosure sale, or repossession is close, tell us on the first call so we can move quickly.
