Divorce & Bankruptcy

Divorce & Bankruptcy

It’s common for a debtor to file bankruptcy shortly after their non-filing spouse files for a divorce. Sometimes this is done out of necessity and other times it’s simply done out of spite. In either event, it’s actually best for both individuals to file a chapter 7 bankruptcy together, especially if both spouses have a lot of joint debt that could be erased in a little over 3 months.

Automatic Stay & Bankruptcy

It’s important to remember that a non-filing spouse must be very careful once their ex-spouse files bankruptcy as they could be in violation of the automatic stay if they attempt to harass a debtor in a pending bankruptcy case. Any attempt to pursue civil contempt in family court could be perceived as a violation of the automatic stay which would mean that the non-filing spouse inadvertently violated the automatic stay and he or she is in contempt of court.

How to Avoid Violating the Automatic Stay

The safest course of action for the non-filing spouse is to file a Motion for Relief from the Automatic Stay requesting relief from the automatic stay to proceed with a state court contempt proceeding against the Debtor.  Whether to terminate, modify, condition, or annul the bankruptcy stay under § 362(d) is within the discretion of the bankruptcy court. See Matter of Holtkamp,669 F.2d 505 (7th Cir.1982); In re Shariyf, 68 B.R. 604 (E.D.Pa.1986); In reColonial Center, Inc., 156 B.R. 452, 459 (Bankr.E.D.Pa.1993). It’s a comfort order to ensure you don’t arguably violate the automatic stay. See In re Chandler, 441 BR 452 (Bankr. E.D. Pa. 2010)

Criminal Contempt versus Civil Contempt

Many courts agree that criminal contempt matters are not subject to the automatic stay pursuant to 11 U.S.C. § 362(b)(1). See, e.g., In re Allison, 182 B.R. 881, 884 (Bankr.N.D.Ala.1995). Courts in this district have found that “the automatic stay has generally been applied to civil contempt proceedings.” In re Leonard, 231 B.R. 884, 889 (E.D.Pa.1999) citing In re Mickman, 1993 WL 128147 (Bankr. E.D.Pa.1993); In re Cherry, 78 B.R. 65, 69 (Bankr.E.D.Pa.1987). The difference between criminal contempt and civil contempt has been described as follows:

The distinction between criminal and civil contempt is . . . a distinction between two permissible responses to contumacious behavior. These judicial responses are classified according to the dominant purpose of the court. If the dominant purpose is to prospectively coerce the contemnor to comply with an order of the court, the adjudication is civil. If, however, the dominant purpose is to punish the contemnor for disobedience of the court’s order or some other contemptuous act, the adjudication of contempt is criminal.

[The] dominant purpose of coercion or punishment is expressed in the sanction imposed. A civil adjudication of contempt coerces with a conditional or indeterminate sentence of which the contemnor may relieve himself by obeying the court’s order, while a criminal adjudication of contempt punishes with a certain term of imprisonment or a fine which the contemnor is powerless to escape by compliance.   In re Lincoln, 264 B.R. 370, 372 (Bankr. ED.Pa. 2001); Garr v. Peters, 773 A.2d 183, 2001 WL 345840 (Pa.Super.2001) quoting Diamond v. Diamond, 715 A.2d 1190, 1194 (Pa.Super.1998).

 

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