There are occasions that arise either before or during bankruptcy cases where a married couple gets divorced and wants to sell their martial home.
If you are residing in the marital home at the time you file for bankruptcy you can declare it as homestead property, and it is exempt from the trustee taking it. If you decide to divorce and sell your marital home prior to filing bankruptcy, then the proceeds from the sale of the home are not exempt.
You would either have to spend those funds on reasonable living expenses prior to filing your bankruptcy case or invest those sale proceeds into another home. If you are getting divorced in the middle of your Chapter 13 case and want to sell your marital home, you will need to file a motion and have a court order permitting the sale and have a determination made on how the sale proceeds will be spent.
You can typically re-invest the money into a new homestead, as long as, that occurs within a year. You would need to open a new bank account that is clearly titled “Homestead proceeds” and not co-mingle that money with other funds in order to protect those funds.
If you plan to move out of the State of Florida, then the home sale proceeds would not be exempt since you are relocating outside of the state. These situations can be tricky and its best to seek the advice of an attorney prior to making any decisions to ensure those funds are protected.
In the final segment of the series, we will be discussing the process or procedure for getting your student loans discharged. Student loans do not automatically get discharged when you file the bankruptcy case.
They are presumed to be non-dischargeable unless you file what is called an adversarial proceeding complaint seeking a discharge of your student loans based upon undue hardship. The adversarial proceeding is associated with your bankruptcy case, but it’s a totally different proceeding with a different case number.
The first step is to determine if you meet the requirements previously mentioned so you have a likelihood of success when you file the adversarial proceeding. There is a process of collecting your student loan payment history and noticing the proper defendants when the lawsuit/adversarial proceeding gets filed.
There is now an attestation form that is filled out with supporting documentation to streamline the process. This is intended to encourage the department of education and trustee’s office to be able to stipulate to some facts without unnecessary litigation. The attestation form goes over some of the same categories as the bankruptcy petition such as your current income and expenses, future inability to repay your student loans, prior efforts to repay your student loans, and current assets.
There is additional costs associated with the adversarial proceeding such as additional attorney’s fees so you would need to budget the attorney’s fees and costs to file both the bankruptcy case and your student loan adversarial case. A ballpark estimate for both would be approximately $5,000-$6,000.