Divorce and Bankruptcy
Copyright © 2009 StraightDivorce.com
When it comes to life, none of us are immune to the challenges and major disruptions such as divorce, which often drives many American households over the financial edge and into bankruptcy. According to a recent article in USA Today, “Nearly 90% of all families with children who filed for bankruptcy, list divorce as one of the causes for bankruptcy.” The article went on to say: “About one-third of the families owed an entire year’s salary on their credit cards, which is why it’s easy to see how a divorce could throw a family into a downward financial spiral.” And all too often, couples with financial difficulties think that divorce will eliminate the money problems, mostly because each thinks the other is responsible for the financial issues. Unfortunately, divorce does not end money problems, as the debts incurred will remain intact until they are paid, which is why filing bankruptcy can sometimes help. But bear in mind, filing bankruptcy will not avoid court ordered alimony or child support payments because these payments are not dischargeable in a bankruptcy proceeding.
Are You and Your Spouse Heading Towards Divorce?
As divorce is one of the most stressful and emotional situations, when you combine the issues of bankruptcy along with divorce it can get quite traumatic, which is why if you are considering a divorce or bankruptcy, you should engage the services of a divorce and bankruptcy attorney that can help with all the details. Consequently, if you and your spouse are heading towards divorce and there are a lot of debts mounting up, it might make sense to file for bankruptcy before starting legal divorce proceedings. The reason? Bankruptcy makes it easier to negotiate the division of remaining debts and can also protect you from a soon to be ex-partner filing bankruptcy down the road. Experienced divorce/bankruptcy attorneys know all the ins and outs of both divorce and bankruptcy issues and should be consulted before you consider bankruptcy.
Can Bankruptcy Help When it Comes to Divorce?
The reason bankruptcy, which is a legal proceeding, can help some people is because it gives people a fresh financial start by either temporarily or permanently preventing creditors from collecting debts from you. And if your spouse files for bankruptcy while getting a divorce, the property division aspects of your divorce proceedings come to a halt until the bankruptcy is complete. Bankruptcy law triggers what’s known as automatic stay. What that means is if your spouse declares bankruptcy during a divorce, more than likely your attorney will advise you to do the same. If you don’t join forces in the bankruptcy, creditors will pursue you instead of your spouse. Although the divorce settlement is between you and your ex-partner, the creditor can try to collect the debt from either of the two spouses, which means that if your ex doesn’t pay his or her share of the debts, the creditor can try to get you for the payment. And if you were having financial difficulties before the divorce, it could send you into bankruptcy as well.
In conclusion, if you’re planning on divorce and debt is overwhelming you, you might want to consider filing bankruptcy. If you have large debts that are not likely to stop accumulating or if you can’t negotiate a good resolution with your creditors, filing for bankruptcy is a good solution. Ideally, spouses who are getting divorced should cooperate and file jointly before divorce. In either case, never make hasty decisions when it comes to divorce or bankruptcy.