The wife incurred about $90,000 in attorney’s fees during the divorce proceedings. The husband paid about $20,000 of that amount before the entry of permanent orders, and the wife requested that the court order him to pay the remaining amount at the permanent orders hearing. The court entered a decree dissolving the marriage, as well as permanent orders regarding the division of the marital estate, maintenance, and parental responsibilities and child support. It deferred a ruling on attorney’s fees, however, and set a hearing for six months later.

The wife served the husband with discovery requests seeking information about his personal and business financial accounts. He obtained a protective order for this information from the court, which agreed with his claim that any eventual attorney’s fee award would be based on his financial resources on the date of the permanent orders. At the fee hearing, he claimed that he should not be ordered to pay the remainder of the wife’s attorney’s fees because they each had the same amount of assets “on paper.” De Koning at 3.

At the fee hearing, the wife referenced evidence that certain assets awarded to the husband had appreciated by about $100 million in value since the permanent order hearing. The trial court agreed with the husband, and while it expressed sympathy with the wife’s financial situation, it ordered that the husband pay no additional attorney’s fees to her.

The Court of Appeals disagreed with both the trial court’s ruling and the parties’ description of the permanent order and fee hearings as two separate hearings. It noted that the purpose of a fee award under C.R.S. 14-10-119 is to equitably apportion the costs of divorce “based on the current financial resources of the parties.” Id. at 6, quoting In re Marriage of Lewis, 66 P.3d 204, 207 (Col. App. 2003). It further held that a decision on fees is “part and parcel of dissolving the marriage.” De Koning at 7, quoting In re Marriage of Hill, 166 P.3d 269, 272 (Col. App. 2007).

Until the trial court ruled on fees, the permanent orders were not complete, so the date to use to review “current financial resources” was the date of the fee hearing. The court vacated the protective order, reversed the attorney’s fee judgment, and remanded the case.

If you are currently involved in or are considering filing for, a divorce, a knowledgeable and experienced family lawyer in Denver can help you understand your rights and responsibilities and can prepare the best possible case for you. To schedule an initial consultation with a dedicated family law attorney, please contact us today through our website or at (303) 781-0322.

What Happens If a Couple Separates?

In some respects, if a couple separates but remains married, the effect of one spouse filing for bankruptcy is not much different than if they lived together. Assuming the debtor spouse filed individually, the nonfiling spouse might find that certain marital property was considered part of the bankruptcy estate. While the debtor spouse could wipe away a substantial portion of his or her debts, the nonfiling spouse would still be responsible for his or her separate debts.

The above may depend upon how long the couple has been living apart. If the debtor spouse waits several years after the separation to file for bankruptcy, it is more likely that the bankruptcy court and trustee will view the nonfiling spouse’s property as separate property, not marital property that is part of the bankruptcy estate.

Nonfiling spouses who have received a legal separation, on the other hand, have a situation that is very similar to divorce. The court has already ruled on division of the spouses’ property, alimony, child support, custody, and visitation.

If the couple is in the middle of bankruptcy when they file for a legal separation, the bankruptcy estate remains in effect. In the case of a Chapter 7 bankruptcy, that is because the pre-bankruptcy estate has already become property of the trustee. In the case of the years-long Chapter 13, the debtor spouses may only need to adjust their payment plan to account for changes in their incomes and living arrangements

What Happens If a Couple Divorces?

If joint debtors going through a bankruptcy file for divorce, as with a legal separation, it is possible to keep the bankruptcy estate in effect. The couple might seek to create two different bankruptcies, however, through the act of “severing” the joint debtor. To do this, both spouses ought to ensure that the marital debt is split equitably so it can be applied to each case.

If an ex-spouse files for bankruptcy after divorce, then more issues come up. Can this spouse have obligations to pay alimony or back child support “discharged” like so many other debts? Fortunately, no. Since 2005, the federal bankruptcy code has forbidden debtor spouses from discharging any debts owed to “a spouse, former spouse, or child of the debtor.” Instead, if an ex-spouse files for Chapter 13 bankruptcy, he or she would be required to pay the child support through the court-mandated payment plan.

However, the nonfiling spouse going through a divorce has other concerns. First, if the debtor spouse files for bankruptcy during divorce proceedings, the automatic stay brings divorce proceedings to a halt until the bankruptcy is dismissed or discharged, unless the nonfiling spouse is able to obtain what is known as “relief from automatic stay.”

Moreover, while the nonfiling ex-spouse might have thought that the divorce meant a break from the other spouse for good, creditors might think otherwise. For instance, if the couples used one credit card during the marriage and that card remains in both of their names, the nonfiling ex-spouse might be pursued by credit card companies for full payment of the debt. That is because they cannot pursue the debtor ex-spouse, who is protected by bankruptcy’s automatic stay, and because their joint names on the card mean that each spouse is 100 percent responsible for paying the debt. This could also happen if the couple were still married, but it is all the more shocking when it follows a divorce.

Meanwhile, the debtor ex-spouse has problems, too. Not only is he or she still responsible for alimony and child support payments, but filing after divorce may also affect his or her property exemptions, possibly making some property “nonexempt” that would have been exempt from liquidation otherwise.

If a Colorado couple is planning to divorce, it is far more preferable that they file for bankruptcy before the divorce than after, as the process is much cleaner.

If you are planning to divorce, it is crucial to have a knowledgeable Colorado family law on your side. Contact the experienced Denver family law attorneys at Plog & Stein.

Related Posts:

Division of Property During Divorce in Colorado

How Business Interests Are Divided in Colorado Divorce Cases

Gifts and Property Division During a Colorado Divorce

This blog will look at bankruptcy as it relates to Denver couples who separate and divorce in two parts. The first part will discuss bankruptcy in general, and what happens when one member of a still-married couple files for bankruptcy. The second part will discuss potential problems a couple encounters when they separate and one party files for bankruptcy, or when one party files during or after divorce proceedings.

What Is Bankruptcy?

When individuals or couples file for bankruptcy, it is usually because they are looking to clear away debt. Their house might be “underwater” — meaning it is worth less than they owe on their mortgage — and they may have several large debts, such as for credit cards. In these situations, creditors will act aggressively to either pursue the debt or, if applicable, to foreclose or repossess the property. A family’s lives might be filled with threatening phone calls and letters. People in this situation typically file for bankruptcy because they have no other choice: they cannot make a deal with the credit card companies or afford to make their current mortgage payments.

When individuals file, they typically file for either Chapter 7 or Chapter 13. Chapter 7 is the most common, and is used when individuals have a lot of “unsecured” debt (debt that is not secured by property, such as a house) that they cannot pay off. The most common type is credit card debt. A Chapter 7 bankruptcy usually lasts from three to six months, and the individual or couple cannot file again for eight years. Once a debtor files for Chapter 7, the debtor’s property is put in the hands of a trustee, who determines which of it is “nonexempt” — that is, can be liquidated and used to pay off creditors. Every state has exemptions that debtors can apply to protect much of their property from liquidation, including Colorado. After the trustee has liquidated the nonexempt property and paid the unsecured creditors, the debtor receives a discharge.

In a Chapter 13, the debtor typically enters a three-to-five year court-certified plan to repay their debts. Chapter 13 is most common for those who face foreclosure and want to keep their homes, and who have enough income to make payments over time. Once a debtor has completed a Chapter 13, he or she cannot file again for four years.

In both Chapter 7 and Chapter 13, the debtor receives an injunction called an automatic stay at the time he or she files. It prevents creditors from harassing or attempting to repossess property while the bankruptcy remains in effect, providing debtors with peace of mind.

When Members of a Couple File For Bankruptcy

A couple may either file for bankruptcy jointly, or one member of the couple may file individually. Couples often file for bankruptcy jointly in an effort to protect as much of their property as possible, because couples in Colorado receive double the exemptions available to an individual. That works best when the couple has a lot of joint debts. However, if only one of the couple has a lot of debt, the one without debt might not want to be responsible for paying debts owed by the spouse. In that case, it might be better for that spouse to file individually. Since Colorado is a marital property state, rather than community property, it is not a given that any property acquired during the marriage will be considered part of the bankruptcy estate. The other spouse will still be responsible for his or her individual debts.

If bankruptcy appears complicated when couples are still married, it becomes even more complicated when they separate or divorce.

If you are planning to divorce, it is crucial to have a knowledgeable Colorado family law on your side. Contact the experienced Denver family law attorneys at Plog & Stein, P.C.

Related Posts:

Is Sick Leave Considered Marital Property in Colorado?

How Business Interests Are Divided in Colorado Divorce Cases

Gifts and Property Division During a Colorado Divorce

Pursuant to Colorado Rules of Civil Procedure, Rule 16.2(e)(2), the basic list of documents to be provided in a divorce or child support case is:

1. Sworn Financial Statement, which is a comprehensive document, to be drafted by you or your attorney, setting forth income, assets, debts, and monthly expenses.
2. Last 3 months pay stubs.
3. Last 3 years personal and business (if applicable) tax returns.
4. Personal and busniess financial statements (I have yet to have a private person do a personal financial statement, thus this generally only applies to people with businesses).
5. Current bank statements.
6. Current debt statements, which includes credit card or other debt statements.
7. Current investment statements.
8. Current retirement account statements.
9. Documents related to real estate.
10. Documents regarding any insurance policies.
11. Documents regarding any vehicles.
12. Documents regarding day care expenses.
13. Documents regarding employment benefits.

These disclosures are generally required to be exchanged by the parties by the initial conference date in your divorce case or custody case, which generally will occur within 40 days of the case being filed, or as set forth by the court in a child support case. As you can see, the rules provide for complete financial disclosure. The purpose of this rule is to ensure that both sides have a clear picture of the other’s financial situation for purposes of settlement, or so that each side and the court has a clear picture for purposes of a contested hearing.

As divorce deals with not only child support, but the division of assets and debts, it is important for there to be financial transparency between the parties. It is not uncommon for the attorneys at Plog & Stein to have cases in which one party or the other has been the one who has primarily dealt with the income, control of the accounts, payment of the bills, etc. Thus, the other party may have almost no knowledge as to expenses, income, or the holdings of the marital estate. In the olden days, it was often the wife who was in the dark. Today, husbands are sometimes the ones lacking financial knowledge. Our Denver divorce lawyers often hear that the one who controls the finances is a controlling and secretive person related to such. Courts are keenly aware of the games that can go on with finances and the fact that one person may be completely in the dark. As such, most Denver area divorce courts will not sign off on the decree, thereby granting the divorce, until they know that both sides have completed their financial disclosures.

As relates to child support, whether in a child support case or a custody case, the disclosures also matter. Though assets are not being divided, attorneys may often need to see the assets and debts of the other party for purposes of trying to ascertain if there is hidden income or additional income that would also go into a child support calculation. The list of disclosures in these cases may not matter when both people have regular jobs. In such cases, the attorneys may really only need to see pay stubs, sworn financial statements, tax returns, day care documents, and proof of health insurance. The remainder of the list becomes important in instances in which one party is self employed, underemployed, or claims to be unemployed, yet magically seems to financially survive with no visible source of income. In essence, your family law attorney is trained to figure out monthly income for child support purposes from looking at assets and expenses as well. Thus, those things may matter.

Beyond courts holding up hearings or final orders, or getting upset with parties who fail to make their financial disclosures, there are broader ramifications of not doing financial disclosures properly and/or related to the timing of getting them done. We have seen both sides of divorce cases in which the parties arrive at an agreement, get that agreement put into writing, sign on the dotted line without having exchanged their financial disclosures, and submit the agreement to the court. Of course, this is done without attorneys involved. The problems arise when one party wakes up and says, “hey, wait a minute, this agreement is wholly unfair.” If financial disclosures were not done properly and the court determines that the agreement is, in fact, unfair or unconscionable, the court can toss the entire agreement and make the parties start over again. I have litigated this issue as a Denver divorce lawyer from both sides of the coin. Parties to a divorce need to recognize that, technically, once the final divorce agreement (called Separation Agreement) is signed, the statutory presumption is that it is a binding contract as to property, debt, and potentially alimony. Therefore, never sign a final divorce agreement until you know you have full financial disclosures from the other side. Also, never presume you will bind the other side to that agreement if you did not make full financial disclosure. Great cost can arise from litigating these types of matters.

Finally, should one side fail to make full financial disclosure, the Rule also allows for a continuing jurisdiction on the part of the court for 5 years after the divorce decree enters, over any property that is discovered later, meaning it was not previously disclosed. Believe it or not, people do actually try, once in a while, to conceal assets. Now you know what you need to provide and receive from the other party. Your Denver family law attorney can help you understand those disclosures and how to use them to help you in your divorce or child support case.

Without explanation, those lay people brave enough to try to figure out divorce statute and the meaning of “debt” may be left scratching their heads. In our divorce practice, we view debt almost as negative property in need of division. Setting that aside, definition is also needed. Courts generally view marital debt as debt incurred during the course of the marriage.

However, not all debt incurred during the course of the marriage is marital or subject to division. To understand what marital debt is requires a Colorado litigant to also understand what marital debt is not. Debt incurred prior to the marriage is non-marital or pre-marital debt. The debt a party has prior to the marriage remains his or her separate debt. This can include credit cards, student loans, a mortgage on a house, or any other pre-marital obligation. These debts are not divided by the court as part of the divorce process, though they can be viewed potentially as an economic circumstance when it comes to figuring out other aspects of a case, such as alimony or property.

Though pre-marital student loan debt is non-marital, there is an argument that student loans incurred during the course of the marriage are marital and should be divided. When working out a settlement agreement, or fighting in the courtroom, our general position is that student loans should be considered separate debt of the party incurring them. The benefit of the education gained will last a lifetime and well beyond the time period after the divorce in which financial entanglements may continue. On the flip side, one could argue that the other party derives a benefit from the student loans, such as more child support, based on more income, based on the education obtained via the student loan incurred during the marriage.

Another common misconception about marital debt is that if the debt is not titled jointly, it is non-marital. This analysis is generally wrong. Presuming that the individually titled debt was incurred for marital purposes, such as food, clothing, shelter, the kids, etc., the debt is marital, whether titled jointly or not. We see many families in which all the debt is in one party’s name due to him or her having better credit. It would be grossly unfair to stick that person with all the debt incurred during the course of the marriage solely because he or she was able to obtain the credit. Most Denver area courts ascribe to this theory as well.

Going back to the issue of debt being incurred for marital expenses, it is not uncommon for someone to come into our office listing a whole array of debt incurred by his or her spouse and questioning where in the heck the debt came from. For example, an attorney might be faced with a situation in which a family has $10,000 per month in income, $7,000 per month in living expenses, and $50,000 in credit card debt incurred by one spouse. This raises questions and eyebrows. With a positive cash flow of $3,000 per month, how on earth can there be $50,000 in debt? In such instances, our attorneys will attempt to do a thorough analysis of the debt in terms of figuring out what it was incurred for and when. We often say that if the debt was incurred for diamonds and furs, or for separate trips to Vegas, it should not be considered part of the marital mix. A court would likely find that debt to be incurred for selfish endeavors and to be the sole problem of the person racking it up.

Other aspects of debt in a divorce case tie into certain property. A general rule of thumb is that the person keeping a piece of property, such as a car with debt or a house with a mortgage, will be solely responsible for that debt. This makes sense, as with each payment made, the value of the property (in theory and pre-2008 economic crash) goes up. It would also be foolish to leave the other party responsible for this debt. In these instances, the debt associated with the property is not factored into the mixing and matching of debts and assets. Though the debt would not be factored into the property/debt division analysis, any equity in the property would be.

Another common question regarding debt in a Colorado divorce relates to the time period between separation and the final entry of the divorce decree. Often times, people assume that any debt accrued after separation is the problem of each party. This is not always the case. Though some courts may follow this theory, most will look at all the facts and circumstances. Courts have the ability to divide all marital debt accrued up to the time the divorce is final. In reality, one party may be forced to incur debt until such time as a temporary child support or maintenance order is entered. In other instances, the party paying the child support or maintenance may have to incur debt to meet other marital obligations or just to survive.

Just as with property, debt is generally divided equally. Sometimes it is divided disproportionately, depending on the parties’ financial circumstances. Just as with property, the general idea is to mix and match the debt (and the property) such that both sides are left with roughly equal amounts of property and debt. It would also behoove both sides to try to take on as much individually titled debt as possible, so as to minimize the risk of relying on your spouse (who is already likely not thrilled with you) to pay debt in your name.

Marital debt is a significant aspect of property division is many Denver area divorces. At Plog & Stein, our Denver divorce lawyers sometimes see cases in which there is more debt than property to be divided. Sad, but true. As divorce orders or agreements regarding debt are generally not dischargeable in a bankruptcy, it is important to see debt allocated fairly.