Common issues that arise with divorce and bankruptcy

Special considerations arise at the convergence of divorce and bankruptcy. Don't believe the myths.

2013-02-06

February 06, 2013 (Press-News.org) Electing to file for bankruptcy can be a difficult decision, and the circumstances can be even more challenging when a marriage is also on the rocks. It is not uncommon for marital troubles to relate to financial struggles, however, especially in the current economic downturn. Accordingly, it is important to understand some basic issues and common myths regarding bankruptcy and divorce.

Myths about bankruptcy and divorce

One of the most predominant misconceptions about bankruptcy and divorce is that one can file for bankruptcy after divorce, and then the individual will not have to pay any debts assigned to him or her in the divorce decree. Although filing for bankruptcy may result in a significant debt discharge, this blanket statement is not true.

A divorce decree does not automatically remove a spouse's name from the couple's joint debt, even if it says one spouse is responsible for that debt. Therefore, if one spouse refuses to pay it or attempts to discharge the debt in bankruptcy, the creditor may pursue payment from the other spouse. If the other spouse pays the debt assigned in the divorce decree to the spouse who filed for bankruptcy, the spouse who paid may be able to sue the other spouse for reimbursement.

In addition, certain debt obligations created in divorce are not dischargeable in bankruptcy. Under the federal Bankruptcy Code, child support and spousal support debt cannot be discharged in bankruptcy.

Importantly, though, depending on the type of bankruptcy selected, the individual may be able to discharge some other marital debts. In Chapter 13 bankruptcy, some marital debts can be discharged, meaning the individual is no longer legally responsible for the debt. In Chapter 7 bankruptcy, however, almost no marital debts can be discharged. In addition, by reorganizing one's debt in Chapter 13 bankruptcy, wage garnishments for child or spousal support arrearages may be reduced.

Another common myth is that, if one spouse files for bankruptcy, the other must file for bankruptcy, too. Before a divorce is finalized, one or both spouses may file for bankruptcy jointly or individually. An individual also may file for bankruptcy individually after the divorce. Because both divorce and bankruptcy proceedings affect a couple's assets and debts, it can be especially complex to go through divorce and bankruptcy at the same time.

Filing for bankruptcy can help a couple or an individual obtain a fresh financial start in conjunction with a divorce. There are different advantages to filing for bankruptcy before or after a divorce, so it is important to speak with a knowledgeable bankruptcy attorney about the timing and type of bankruptcy that is best for you.

Article provided by The Law Offices of Alexzander C. J. Adams, P.C.
Visit us at www.portlandbk.com

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Common issues that arise with divorce and bankruptcy

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