Many marriages fail due to financial stress. Even if there are other factors involved, if one or both spouses file for bankruptcy, that may complicate any pending divorce proceedings. The biggest impact, in many cases, stems from the fact that filing for bankruptcy in federal court automatically stays or suspends any pending judicial proceedings involving the debtor. This includes a divorce lawsuit that has already been filed in the Illinois courts.

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy, a debtor must turn all of his or her assets over to a court-appointed trustee. The trustee then liquidates the assets, subject to certain exemptions, and uses the proceeds to pay back the creditors as much as possible. Any exempt or remaining assets are then returned to the debtor, who receives a discharge from the bankruptcy court.

When it comes to divorce, Illinois law defines marital property as any assets or debts that either spouse acquired during the marriage. Assets the spouse owned prior to marriage are generally considered separate, non-marital property. However, it is possible for separate property to be reclassified as marital property through a legal doctrine known as “transmutation.”

Court Refuses Husband's Request for Reimbursement of House Payment

What does transmutation involve exactly? Here's an illustration from a recent Illinois divorce case. A could divorced after 28 years of marriage. The couple owned a home that they purchased in 1999. The husband made a $20,000 down payment for the house, which represented the proceeds from the sale of various items personal property that he owned prior to his marriage.

Stock options are among the trickier assets to deal with in a divorce. Unlike outright owning stock in a public company, which is easy to value based on market prices, stock options represent a right to purchase shares of a business at some future date. When one spouse has stock options as part of his or her compensation package, the other spouse may not be aware of these options or how they actually work.

Understanding Stock Options

The basic idea behind stock options is relatively simple in theory but can be rather complex in practice. For instance, assume an employer grants an employee the option to purchase 1,000 shares after the employee has worked at the company for five years. Once the option vests, the employee is guaranteed the right to purchase the option shares for a fixed price, regardless of their actual market value. So, if the options were granted at $5 per share, that is how much the employee would pay, even if the stock is now worth $30 per share.

A common concern in divorce cases is that one spouse may be hiding assets from the other. In the past, hiding assets might have involved stashing cash in a safety deposit box the other spouse does not know about or transferring an investment account into the name of another family member. In the digital age, however, there is another method an unscrupulous spouse might employ—using marital assets to purchase Bitcoins.

Hiding Money in Digital Wallets

You may have heard of Bitcoin and similar digital currencies without understanding exactly how they work. Essentially, Bitcoin is an independent financial network that allows individuals to send electronic payments to one another. These payments are expressed in units of “Bitcoins,” which are not physical currency but rather the product of a complex encryption algorithm. This is why Bitcoin is often called a “cryptocurrency.”

Nobody wants to be trapped in a failed marriage. Depending on where you live, however, getting a divorce may not be so easy. Consider a recent story from the United Kingdom where a 66-year-old woman is fighting in an appeals court to obtain a divorce. The woman previously told a family court judge in England that she has been “desperately unhappy in her marriage for many years” and there was “no prospect of reconciliation” with her estranged husband.

Despite that, the judge refused to grant a divorce, dismissing the wife's misery as routine complaints “of the kind to be expected in a marriage.” If the appeals court does not reverse the family judge's decision, the wife will have to live separate from her husband for a period of at least five years before she can finally receive a divorce.

Illinois Is a Pure “No-Fault” State