FACTORS TO CONSIDER: CONTEMPLATING
BANKRUPTCY AND DIVORCE
By: Tracy L. Hirsch, Attorney
It should come as no surprise that one of the biggest stress factors in divorce is finances. Oftentimes, some of the largest contributing factors to a divorce are debt and financial distress. Given the current state of the economy, couples who are considering divorce need to be concerned about how their current debts will be divided. In many circumstances, couples who are already in financial despair find themselves completely overwhelmed as their households are divided and they are forced to support two household with the income that used to support just one.
For many of these couples, bankruptcy may be the best solution to relieving at least a portion of their financial stress. Generally, it may be in a couple’s best interest to file a joint bankruptcy petition on marital and individual debts before or during the divorce proceeding. This helps eliminate the need to divide these debts in a marital settlement agreement. Additionally, the filing of a joint bankruptcy before divorce proceedings are final would save a significant amount on attorney’s fees and filing fees as compared to both parties being forced to file separate bankruptcies after the divorce is final.
In the case of a Chapter 7 Bankruptcy filing, the couple may be able to completely eliminate credit card debts and other consumer debt. If the couple is facing foreclosure on a home that one party wishes to keep, a Chapter 13 Bankruptcy filing may put that goal within reach by helping to restructure debt and catch up on missed payments. Overall, filing a joint bankruptcy could help to level the playing field and eliminate at least one source of stress in an already contentious situation.
After the divorce is final, many divorcees find themselves in a situation where their income is further reduced due to unemployment, frequent layoffs or reduction of work hours. These individuals have trouble keeping up with support payments, credit card debts, and secured debts, such as homes and cars. Although the bankruptcy court does not have the authority to modify or discharge obligations of support or alimony, relieving oneself of other burdensome obligations such as credit cards or loans may make those domestic obligations much more affordable.
Regardless of whether an individual is in the beginning stages of divorce proceedings or five years out of of one, financial distress can be overwhelming, Unpaid bills can lead to foreclosure, repossession, garnishments, and even loss of job. Talk to an experienced attorney to find out what options are available to you.