Divorce and Bankruptcy
How Does Divorce Affect Bankruptcy
Divorce and Bankruptcy
I am sorry to say there is a link between bankruptcy and divorce. Sometimes money problems have created so much friction that bankruptcy is a last-ditch effort to save a marriage. Other times, a married couple has made the decision to file for divorce and they want to clean up their debts, knowing that two people really can live cheaper than one and that they will not be able to support the same debt load that they did, when they were married.
Bankruptcy can save a marriage, or it can make it so those two people can end their marriage with a fresh start and live a decent life with financial security, even after they divorce. Whatever the case, here is what you need to know:
- Joint bankruptcy. Only married people can file a joint bankruptcy, together. If you wait until after you are divorced, you will each have to file bankruptcy on your own. That means two filing fees and two lawyer fees. We try to give discounts in these cases, but it still costs you more.Where possible, I recommend divorcing couples to file bankruptcy together. Sometimes, one spouse is dead-set against it. If that spouse will assume the burden of all of the joint bills, then it is fine by me that my client files bankruptcy and leaves the ex-spouse to go on their own, but the unwilling spouse is sometimes living with unreasonable expectations. If this is the case, it might be a good idea to complete the divorce, first, and get it in writing in the Decree of Dissolution of Marriage signed by the divorce judge that this is the way things will be. Then, you can file bankruptcy on your own.
- Filing on your own. Married people can file bankruptcy without their spouse: you do not have to file together. If most of the debts are in just one spouse’s name, that spouse can file bankruptcy. If the debtor is living with his or her spouse, the court will want to know about both of their incomes and expenses, but filing together is not necessary.
- Child support and alimony. You cannot bankrupt out of child support, or alimony. If you were ordered to pay part or all of the medical/dental debts of your children in a divorce decree, this may be considered child support. If you were ordered to pay your ex-spouse’s attorney fees, this may be considered a form of alimony. If you have significant child support or alimony delinquencies, you may want to consider filing Chapter 13 to consolidate and pay these debts.
- Property/debt settlements. This is perhaps the biggest change in the new 2005 Bankruptcy Code. Let’s say that you are ordered in a divorce decree to pay a joint credit card. If you do not pay it, your spouse can sue you for the money, or move to hold you in contempt of court for violating your divorce decree. Under the old law, you could file Chapter 7 and possibly get out of this obligation. The 2005 amendments to the Bankruptcy Code made this impossible in Chapter 7, but it is still possible in Chapter 13.
- Conflict of interests. If both spouses in a divorce come to my office and you see me about bankruptcy, understand that a conflict of interests may arise. I CAN represent both debtors in a bankruptcy, with their consent, and if they can agree on everything, but if I have seen and counseled a married couple, I cannot then turn around and represent one person against the other. That would be unethical. There can be no secrets between the two of you, and if you at any time disagree about a course of action, I may have to withdraw from your case, if I am representing both of you. I may ask you to sign a waiver of conflict of interests, before we proceed with your case. If you think there is a possibility that your spouse will not go along with a bankruptcy, you may want to come and see me by yourself so that I only represent YOU. (309)788-3799.