Financial stress causes many divorces. So, it’s no surprise that many couples considering divorce also think about bankruptcy. This post examines the intersection of bankruptcy and divorce. It explores how these two areas interact and impact individuals. In many cases, it makes sense to pursue bankruptcy prior to a divorce. Couples often save money by filing for bankruptcy together. It can also eliminate property and debt that would otherwise be part of the settlement agreement, simplifying the process.
If both parties agree that bankruptcy is inevitable, then filing before divorce may be beneficial. However, if only one person files, shared debts can still affect the other. Additionally, if the debts were entered into jointly, creditors can hold the non-filing party responsible. This is true regardless of how the court assigns the debt. While the court can divide financial obligations, it does not alter the original agreement with the creditor.The only way for both parties to release the debt is through a joint bankruptcy.
Although bankruptcy can discharge much debt,. However it does not affect child support or spousal support obligations. Individuals should not enter into bankruptcy in an effort to get relief from support orders. Divorce is not a bad option, especially if both have significant debt and few assets. It can be a wise choice.
Individuals considering bankruptcy and divorce should understand that debt from divorce can’t be discharged in Chapter 7 bankruptcy. It can only be discharged through Chapter 13, where the individual takes on some debt via a payment plan. Therefore, both parties must set aside differences and cooperate, especially if pursuing bankruptcy.
Will I Be Responsible for My Spouse’s Debts if I Do Not Declare Bankruptcy?
Many individuals fear taking responsibility for their spouse’s or former spouse’s debts. This occurs if they don’t file for bankruptcy. You may incur responsibility for debts if you incurred them during the marriage, even if they solely benefited your spouse. That’s why it is critical to hire an experienced Massachusetts divorce attorney to represent you legally and manage the financial implications you may face.
My Spouse Makes More Money, So We Cannot File for Chapter 7 Bankruptcy. What Can I Do?
In some cases, you and your spouse may, combined, not qualify for Chapter 7 bankruptcy. Separately, however, you may be able to pursue a Chapter 7 filing. If your spouse earns significantly more than you, and you want to file for Chapter 7 bankruptcy, it may make sense to wait until after your divorce is complete. It is important to speak with a bankruptcy attorney to determine your best method of filing.
We Started to File for Divorce, but Now We Are Pursuing Bankruptcy. What Should We Do?
Filing for bankruptcy puts an automatic stay on the divorce proceedings. That does not mean, however, that the court cannot establish support payments or that the support can be put on hold. It simply allows for a period of time during which the couple can proceed with the bankruptcy and then revisit the divorce proceedings at a later date.
When a couple seeks divorce and one or both parties believe that bankruptcy may be in their future, it’s critical to meet with an experienced Massachusetts divorce attorney right away.
Couples pursuing or even considering both bankruptcy and divorce should meet with both an experienced family law attorney and a bankruptcy attorney prior to proceeding with either. Since no two cases are exactly the same, it is critical to seek advice from practitioners who understand how bankruptcy and divorce can affect each other. The advice and guidance may save you thousands! Contact Damian Turco today for a free consultation to learn more about how bankruptcy may affect your divorce case.