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When someone goes through a divorce in Colorado Springs, CO, the court decides how to split up the couple’s property. In Colorado, the division of marital property during divorce must follow the state’s equitable distribution rules, while bankruptcy is governed by federal law. When these two systems arise, questions arise about which assets are protected, how debts are handled, and whether the divorce court or the bankruptcy court has the final say.

Understanding the details of property division in a divorce is important, as it directly influences what you may retain or forfeit. A family law attorney from The Law Office of Andrew Bryant, can clarify these issues and provide professional guidance to ensure that you make informed decisions during this challenging time.

Read on to learn how bankruptcy and divorce work together in Colorado divorce cases, so you can better understand what to expect.

The Role of Timing in Divorce and Bankruptcy

When bankruptcy and divorce overlap, the order in which cases are filed can significantly affect how property and debts are divided. In Colorado, the divorce court is responsible for equitably dividing marital property, but a bankruptcy filing can temporarily halt those proceedings under the automatic stay, which stops creditors from pursuing collection.

Sometimes, couples may choose to file for bankruptcy jointly before filing for divorce. This approach can simplify the process by eliminating or reducing shared debts, leaving fewer liabilities for the divorce court to divide. It can also lower the overall cost, since only one bankruptcy filing fee is required. However, this may prolong the divorce timeline if the bankruptcy must be completed first.

However, if bankruptcy is filed while a divorce is pending, the automatic stay can delay property division until the bankruptcy is resolved. This can create frustration, as the family court cannot finalize certain financial aspects until the bankruptcy court releases jurisdiction over the property.

Some individuals choose to finalize their divorce first and then file for bankruptcy separately. While this avoids the complication of halting divorce proceedings, it can leave one spouse solely responsible for debts they were assigned in the divorce decree, especially if creditors do not honor the divorce court’s allocation of liability.

Because timing can determine both efficiency and financial impact, couples should carefully weigh these options before deciding when to file. A Colorado Springs family law attorney can address your concerns and advise you on the legally sound ways to handle property when bankruptcy is involved.

How Different Bankruptcies Affect Property Division

The type of bankruptcy filed has a direct effect on what property remains available for division in a Colorado divorce. Each chapter serves a different purpose and interacts with divorce proceedings in unique ways. There are two main types of bankruptcy, namely Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy (Liquidation)

In Chapter 7, a trustee reviews the debtor’s assets and sells any non-exempt property to pay creditors. Colorado law allows exemptions that protect some property, such as a primary residence up to a specific equity amount, vehicles, and household goods. However, non-exempt property may be lost before the divorce court can divide it. For divorcing couples, this means there could be fewer assets left to distribute, potentially altering what each spouse ultimately receives. Chapter 7 cases also move quickly, most of them closing within a few months, which may be less disruptive to ongoing divorce proceedings.

Chapter 13 Bankruptcy (Reorganization)

Chapter 13 bankruptcy allows people to retain their property while servicing debts over a three to five-year period through a court-approved plan. Since the filer retains ownership of assets, more property is available for the divorce court to divide. However, the repayment obligations tied to Chapter 13 can complicate spousal support and debt allocation. For example, the court must account for the filer’s ongoing payment plan when assessing financial needs and obligations in the divorce.

As you can see, Chapter 7 primarily affects the amount of marital property available for division, while Chapter 13 influences how debts and ongoing financial responsibilities are managed. Both can reshape the divorce outcome, making it important to understand which filing best aligns with the couple’s financial circumstances and divorce goals. Make sure you work with an attorney so that you can understand how these may apply in your case, whether a contested or an uncontested divorce.

Talk to a Colorado Springs Family Law Attorney

Property division and the timing of divorce filings all affect what assets and obligations each spouse carries forward. Missteps at this stage can leave one party shouldering more debt than expected or losing assets they had planned to retain. The Law Office of Andrew Bryant helps clients in Colorado Springs understand how bankruptcy impacts their divorce. If you are considering or already facing both processes in Colorado Springs, legal guidance can help protect your rights and ensure your future is built on solid ground. Call us at 719-634-7353  or contact us online to discuss the options available in your situation.