In Bankruptcy Information

Money is one of the most common causes of divorce. More precisely, lack of money or lack of control over spending money is one of the most common causes of divorce. When a couple divorces, it’s unlikely that either of them will be better off alone financially than they were together. That’s because divorce doesn’t do anything about the debts, except maybe allocate who pays what, and post-divorce there are two households instead of one to maintain.

Many people think that a divorce decree that says that the former spouse is responsible for certain debts relieves him (or her) of liability to the creditor. That’s completely false. The creditor made a contract with both parties. Absent the creditor’s consent, a divorce court cannot eliminate the liability of one or the other of the parties. This comes as a big shock when, some months after the divorce, the ex-spouse hasn’t made payments and the creditor comes knocking at the other’s door.

Although a divorce court can’t relieve a person of liability for a debt to a third party, a bankruptcy court can. That’s because the law expressly provides for a discharge of debts to qualifying debtors. What this means is, if one of the parties to a divorce is contemplating filing bankruptcy, it’s almost always better for both parties to file. Doing so simplifies the allocation of debts in the divorce, since most of them are discharged; and it ensures that one party won’t get stuck paying a debt she thought he was ordered to pay. Even if a debt allocated to one party in the divorce is a Domestic Support Obligation (or DSO in bankruptcy parlance), which can’t be discharged, you can’t get blood out of a turnip. If the divorce court orders the ex-husband to pay a debt and then he files bankruptcy, the creditor cannot legally attempt to collect from him after his discharge. There’s only one place for the creditor to go and that’s to the ex-wife.

Because only married couples can file jointly, it makes sense that the soon-to-be ex-couple put their divorce on hold long enough to file bankruptcy jointly. This can be awkward in an acrimonious divorce, but the parties should put on their big boy and girl pants and do it together. It saves two bankruptcy filing fees and two attorneys’ fees, plus it simplifies the divorce. Just remember that the bankruptcy attorney is NOT your divorce attorney. If you have issues over child support, visitation, property distribution or anything unrelated to bankruptcy, your bankruptcy attorney is not the one to talk to.

If we can help you with a bankruptcy, please contact us.

Recommended Posts

Leave a Comment

Free Consultation

Not readable? Change text.

Start typing and press Enter to search