Often, finances are the biggest stressors in relationships. Frequently, couples caught up in financial problems believe that divorce is the answer to their problem and each partner blames the other for the ongoing money woes. The belief that the other person is responsible, may, or may not, be true.
A good adage to remember though is: you can divorce your partner, but you can’t divorce your debts; at least the ones you entered into jointly.??
Normally divorce should take a backseat to bankruptcy. If you wait to file bankruptcy in the middle of a divorce, the disbursement of property may delay the divorce settlement. Since bankruptcy deals with debts connected to an individual’s name or social security number, there isn’t an easy way to do both simultaneously and can impact the manner in which the marital debts are handled in divorce.
By filing for bankruptcy together before filing for divorce, all indebtedness will be handled under one case. Wiping out all joint debts may also mean the potential for increasing exemptions amounts. This approach would be good, especially if one person earns most of the money. Bankruptcy, before divorce, can also wipe out debts that neither of you want such as costly car notes or mortgages on homes that are upside-down in value.
If one spouse is the primary breadwinner, then, in bankruptcy, a Chapter 7 filing should be considered. If you and your soon-to-be-ex file for a Chapter 13, then you will both be liable for the repayment and may prevent the division of assets by sale.
Both parties are liable for the debts made following the “I do’s.” A divorce settlement may divvy up the debts and assign responsibility, but the settlement is between you and your soon-to-be-ex-spouse; not between you and the lender. A divorce settlement doesn’t forbid the creditor from trying to recover the debt. If your ex-spouse doesn’t pay the debts assigned to them, the creditor can come calling, even if your ex seeks bankruptcy protection. If things were tight financially before the marriage ended, a spouse’s bankruptcy could spiral the other party out-of-control and into bankruptcy.
Because of the fair credit and lending laws, it makes sense for a divorcing couple to file for bankruptcy before seeking a divorce settlement. At the very least, both parties will know where they stand financially when it comes time to divvy up the marital estate. It may be difficult, but you and your partner will need to swallow your differences and work together. If the relationship has gotten to the point where you can’t talk with each other, bankruptcy before divorce may not be an option.
Bruce Provda is a family law and divorce veteran. Whether you need a firmly grounded attorney for domestic violence, asset distribution following the breakdown of your relationship, deciding on the custody of the children, Bruce Provda is on hand to provide you with specialist advice from a wealth of knowledge gathered and constantly renewed over the last four decades.