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Filing Bankruptcy After Divorce: How Does It Work?

Filing Bankruptcy After Divorce: How Does it Work

Unfortunately, stressful life events sometimes cluster so that we’re forced to deal with a variety of challenges at once.

Divorce and bankruptcy are often two such events.

If you’re dealing with divorce and bankruptcy at the same time, it can be a good idea to explore how both may affect each other. Read on for more information.

Divorce and Finances

As you may already know, going through a divorce can put stress on more than just your family life - the financial aspect of divorce can be trying, as well.

Consider the following divorce factors that can weigh on your checking account:

  • Legal Fees: Whether you and your spouse hired separate lawyers or chose to work your split out through mediation, you likely had to pay someone to help you through the process.
  • Doubled Costs: The basic math of divorcing can also cause financial strain: Splitting income that used to pay for only one household over two can mean there’s not enough to go around.
  • Resettling: If you have children and you’re splitting custody, you’ll have to make sure your kids have beds, clothes, books, etc. at both homes. These types of costs can add up.
Remember, you’re not alone ~ most Americans who seek the protection of the bankruptcy court cite some major financial disturbance as leading to their decision to file.

In many cases, divorce or divorce compounded with another major setback can lead to the decision to file bankruptcy.

Bankruptcy After Divorce

Married couples can file for bankruptcy jointly; divorced couples typically cannot.

If you and your spouse have been considering both bankruptcy and divorce, make sure you consult with a bankruptcy lawyer to discuss the option of filing jointly before proceeding with your divorce.

If you’re going to file bankruptcy, you’ll also need to figure out which type of personal bankruptcy you want to file:

  • Chapter 7 Bankruptcy: This type of personal bankruptcy allows filers to receive a complete discharge of many types of unsecured debts (like credit card bills, medical debt and utility bills). However, the designations of the divorce court don’t hold for bankruptcy filings, which means that any jointly held debt that is discharged in a bankruptcy could possibly be assigned to the other spouse.
  • Chapter 13 Bankruptcy: This type of personal bankruptcy offers filers a period of three to five years to catch up on past-due debts while staying current on other debts. This is often the type of bankruptcy filed by people who are looking to stop foreclosure or repossession. Because Chapter 13 doesn’t involve a debt discharge, this chapter may affect the filer’s ex-spouse in less obvious ways.
Everyone’s situation is different, so consult with a bankruptcy lawyer in your area to determine what may work best for you and your finances.

What Filing Bankruptcy Probably Can’t Do for You

Some debts, including child support and alimony (spousal maintenance) are not usually dischargeable in bankruptcy.

So, if you or your ex-spouse is struggling to make these payments, personal bankruptcy may not be your best choice in resolving those debts.

Other non-dischargeable debts may include:

1.    Most tax debt
2.    DUI fines
3.    Criminal fines and penalties
4.     Most student loans

Bankruptcy can excuse you from other debts to free up funds to cover support payments, but overdue support will remain your responsibility.

A bankruptcy lawyer can explain in more detail how this works.

If you’re truly unable to make such payments (for example, if you lost your job after a divorce), consult with your divorce lawyer for advice.

For advice on Bankruptcy after Divorce, visit www.totalbankruptcy.com


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