Divorce and bankruptcy are the law’s odd couple. It is true that most couples who file for divorce often find themselves filing for bankruptcy as well. This is because most couples do not have enough assets or income from the marriage; therefore, bankruptcy is necessary to cover all of the marital debts.
If you and your soon-to-be-ex feel that bankruptcy is necessary, speak with a skilled divorce attorney. How and when you file for bankruptcy could affect your divorce and vice-versa; therefore, you need an attorney that specializes in these types of situations.
How Divorce Leads to Bankruptcy
It is certainly devastating to know that your marriage has fallen apart. Unfortunately, divorce can cause a serious decline in your financial health, leading to bankruptcy. Some ways divorce can cause bankruptcy include:
• Income Reductions – When you divorce, one spouse takes their income with them. That means the income of the household can be dramatically reduced and no longer can you cover the costs of your debt obligations. While some divorce situations allow you to split these marital liabilities, other times it is best to file bankruptcy on them so that no one is stuck with a bill that isn’t theirs.
• Your Spouse Filed Bankruptcy – While your spouse cannot file bankruptcy to get out of child or spousal support, he or she can file bankruptcy on joint debts to avoid paying them. If your spouse has filed for bankruptcy, then you may want to do the same or you may even be forcedinto filing.
• Astounding Legal Fees – If you have a complicated divorce, you may have a complicated amount of legal fees, too. These legal fees can really take their toll on your financial health. You may not be able to afford your other debt obligations as you start paying off your legal fees; therefore, you may have no other option but to file for bankruptcy.
• Spousal and Child Support Obligations – Again, you cannot file bankruptcy on these court-ordered payments, but you may not be able to afford other debt payments while paying child support or alimony. So, you may be forced to file for bankruptcy to stop the credit card payments and other loan payments you have, so you can free up cash to pay for your support.
Divorce or Bankruptcy First?
If you and your spouse are planning on filing for divorce, but also need to file for bankruptcy, then you may want to file a joint bankruptcy case first before filing for divorce. By discharging the marital debts, you can make the division of assets portion of your divorce a lot easier since you won’t have multiple debts to divide up between each other.
What if Your Spouse Files for Bankruptcy in the Middle of Divorce?
There are many cases where one spouse will file for bankruptcy in themiddle of the divorce. When one party does this, the automatic stay goes into effect. Then, a bankruptcy estate is created. This estate will include your non-exempt property. But, the automatic stay does not stop child support or alimony payments, but it will stop the process of dividing marital assets.
Child Support Cannot be Discharged in Bankruptcy of Any Kind
If your ex files for bankruptcy, there is no need to worry. They cannot discharge their child support obligations, and they cannot discharge any back-owed child support payments they have due to you. But, filing for bankruptcy may give your ex the opportunity to request a modification to their child support order since filing for bankruptcy can be considered a financial hardship. It is important to speak with a family law attorney to review the case and help determine if your spouse has a valid modification request.
Filing for Divorce? Consider Bankruptcy First
Sometimes it is all about a fresh start. If you and your spouse want to file for divorce, you will want to consider filing for bankruptcy first. It can simplify and even make your divorce a cheaper process. It also gives you both the opportunity for a fresh start, and no one has to carry debts from the marriage over into their new life.
If you are going through the divorce process, speak to the bankruptcy attorneys at Jaxlegal today. We can meet with you and discuss your financial situation and help you decide if bankruptcy or divorce should be first. We offer no obligation consultations at our two Jacksonville locations, so call today to schedule yours.
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