Bankruptcy and Divorce

I understand that the mere thought or filing for bankruptcy and divorce at about the same time sounds like an overwhelming task but sometimes it’s the best way to deal with some issues that may make the divorce even more unbearable.

 Marriage and Debts – Bankruptcy and Divorce

If you think that you and your partner are headed for a possible divorce, and there is a lot of debt between you, it might be a good idea to file for bankruptcy before you begin the divorce process. Filing for bankruptcy will pave the way for the divorce to proceed much smoother because it will let you and your spouse to get rid of some of your debt and to be on your way for a clean break. Even if you are a same sex couple filing for divorce, filing for bankruptcy prior to filing for the dissolution of marriage may alleviate some of the financial complications.

While not all debts can be dismissed with a bankruptcy, at least many of them will be gone and allow you both to negotiate on those that remain. Another option is that only one of you file and your spouse can file for bankruptcy later on down the road, you can be protected because you are going to take care of your debts before the divorce.

The whole bankruptcy and divorce works quite simple. When one or both of you file for bankruptcy, all of the property that has been shared by both of them will become a part of the estate and will then be available to pay for the debts. This will also mean that you have been granted an automatic stay, which means that the creditors can’t hound you for money.

Remember that this stay does not prevent you from getting spouse or child support from your ex.

The next thing that will happen is that the bankruptcy court will decide what shared property is exempt from the bankruptcy, meaning that it cannot be sold in order to pay for your debts. Then, the divorce court can divide that property between you and your ex spouse.

If you are trying to negotiate property settlements, and also going through bankruptcy, you are going to be dealing with very complicated issues. Some of the debts that might be related to a property settlement might not be wiped out during the bankruptcy, so you will still need to pay them.

However, these debts can be wiped out if you can show that you can’t pay the debt and still take care or yourself or your children, or that if you wipe out the debt it is going to be better for you than the harm that would be done to the people that you owe by not paying it. This means that if you think your spouse is going to consider filing for bankruptcy after the divorce is final, you need to make sure that your finances are squared away so that you aren’t going to be faced with any more debts.