Did you know that financial stress is one of the leading causes of divorce? Ironically, divorce typically increases financial strain due to splitting income and assets between two separate households. Considering these factors, it’s not surprising that divorce often leads to bankruptcy – or maybe it’s bankruptcy that often leads to divorce. It’s difficult to determine the precursor, but regardless, the two often occur right around the same time. If you’re dealing with both divorce and bankruptcy simultaneously, you’ll most likely agree that it’s an emotional and stressful time, and it can be hard to stay practical when making decisions. Make sure you educate yourself to avoid faulty decision-making that could come back to haunt you both later.
Determining How Bankruptcy Filing Would Affect Your Divorce:
The best place to start is with a free consultation with a local bankruptcy attorney. Regardless of whether or not you end up filing bankruptcy, you will have a clear plan and a good understanding of how the bankruptcy would play out, so you can make educated decisions while you navigate the divorce process. Knowing how bankruptcy could affect your post-divorce finances can be very useful since many financial questions arise during a divorce regarding the division of debts and assets, spousal maintenance, child support, etc. Sitting down and going over the current and projected finances and financial obligations with a bankruptcy attorney before moving forward with divorce proceedings can help you better understand how your financial situation could look post-divorce.
Can Filing Bankruptcy Affect My Divorce Settlement?
While obligations put in place by divorce court order are not dischargeable, some divorce-related debts can be discharged in bankruptcy. You cannot discharge alimony debt or child support through bankruptcy. However, under certain circumstances, you may be able to discharge other personal debts like credit card debts or debts you owe your former spouse for other reasons; for instance, you may owe a balance to your ex for buying out a share in the family home. Discuss this in detail with your bankruptcy attorney to determine eligible debts.
When Your Ex Becomes a Creditor in Your Bankruptcy Case:
Another way bankruptcy may affect your divorce settlement is that your ex may become a “creditor” in the bankruptcy case. When a divorce settlement leaves one spouse “owing” the other, the spouse owed money may eventually become a creditor in the other party’s bankruptcy case. The debt owed is covered by the bankruptcy case, and the ex’s rights to “collect” on the debt are protected.
If you need to file bankruptcy and are postponing because you are also considering divorce, please don’t hesitate. Most bankruptcy offices in the Chattanooga area don’t have a single Consumer Bankruptcy Specialist on staff. Our office is the only one with two. You are in good hands with Kenneth C. Rannick P.C.