The Truth about Divorce Part 2

There is no doubt that divorce often results in debt. Divorcing couples are faced with dividing their existing debt and then shouldering the burden of that debt as individuals rather than as a couple, often leaving one income rather than two to manage the debt. Add to this the legal expenses from the divorce itself, moving expenses, and the cost of managing a household after a drastic reduction in income and you have a recipe for disaster.

There is no doubt that divorce is often a catastrophic financial event that leads people into bankruptcy. The inability to manage financial life after divorce has forced many a divorced individual to petition the courts for relief. But what about couples who are in the midst of a divorce and can see the bankruptcy handwriting on the wall? Filing for bankruptcy can help protect assets and leave more for each of the divorcing parties. .

 

Does Divorce Complicate Bankruptcy?

Filing separately for bankruptcy can make a complete mess of an already messy situation. Not only are divorce courts left trying to figure out how to help couples divide assets, but bankruptcy courts are also left scratching their heads over who owns what and who owes what. Filing bankruptcy jointly can help eliminate confusion, as the parties can be represented by one attorney who looks after the financial interest of the couple. The bankruptcy attorney would act as an unbiased party, providing advice only on bankruptcy issues and not on divorce issues.

 

When to File Bankruptcy

Many times, if a divorce is not overly contentious, it is a good idea to file bankruptcy before or during divorce proceedings. The reality is that, after the divorce, if one party files for bankruptcy, creditors will often look to the other party to satisfy debts that existed during the marriage. This might force the second party into bankruptcy anyway. Filing for bankruptcy as a couple can protect the assets that a couple has and can enable them to both approach their post-divorce financial lives in a better position than they might otherwise have been in. .

 

If Your Ex Files

If your ex-spouse is the one filing, you need to protect yourself and make sure that you still get exactly what has been promised to you. Once your ex-spouse has been to court, and the bankruptcy court has allowed him/her to discharge his/her debts (owed to either third party creditors or to yourself,) you then have the choice of going back to divorce court and asking them to change the amount of child support or other monies you are entitled to. The situation with your ex may have made a big change to your financial circumstances. For example, you may no longer be receiving some of the assets you are entitled to under the agreement, so you can now ask the court to award you more money. .

 

If You File

If you are the partner who is filing bankruptcy and you are paying child support as well, you may want to go back to the court and ask them to reduce the amount of support you are paying now, rather than be left with a payment that you are unable to afford in light of these new circumstances. .

 

Assets

After you and your partner declare bankruptcy, the assets that are not considered jointly owned will be divided up between the two of you. In this way, divorce proceedings are much simpler, because all of the joint toxic debt is eliminated with only viable assets remaining.

However, there are some things to contemplate with bankruptcy and divorce that one might not normally consider under different circumstances. For example, if your spouse was awarded certain property during the divorce proceedings and is considering declaring bankruptcy, you can have a lien put in place that will ensure that if your spouse does declare bankruptcy, that property will be immediately restored to you. Before you consider other options, be sure to talk to your divorce lawyer and your bankruptcy attorney for advice. Remember, declaring bankruptcy during a divorce proceeding is more complicated than other bankruptcy cases, so make sure that you hire experienced professionals to guide you through the process. .

 

Avoiding Alimony through Bankruptcy

One thing is for sure; bankruptcy is no longer a way for one party to avoid family law debts, such as alimony, maintenance, and/or child support. Once a way for contentious individuals to avoid making such payments, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 eliminated the possibility of discharging family law debts by filing a bankruptcy petition. Waiting to file bankruptcy after the divorce has been finalized will not relieve one individual from his or her financial obligation to the other. To determine whether filing before, during, or after divorce is best, seek the advice of a qualified bankruptcy attorney.

Divorce is a stressful time, but after adding overwhelming debt to the situation, it can be hard to keep your head above water. If possible, sit down with your partner and discuss your options. For example, if you have a number of joint debts, then it is often sensible to file for bankruptcy together-before you proceed with the divorce. This is good for a number of reasons, especially since any agreement between the two of you will not have to be amended due to a bankruptcy by one party.