Many times, financial difficulty leads to stress in a marriage. In cases where the financial stress leads to divorce, the issues often lead to bankruptcy filings.
The question that we hear the most often from clients regarding divorce is “What should we do first – the divorce or the bankruptcy?”
There’s actually no easy answer for that question. Every situation is unique, so if you’re asking the same question, you should consult with an experienced bankruptcy attorney. Your attorney will be able to look at all the factors and suggest the route that will work best for you.
In general, if certain conditions are present, filing for joint bankruptcy before the divorce will be the fastest, most cost-effective option:
- Both spouses know that they’re going to file bankruptcy
- There are few, if any, assets that would be exempt under bankruptcy laws, so not much will be divided in the divorce
- The emotional situation isn’t so hostile that the spouses wouldn’t cooperate in a bankruptcy proceeding
If one spouse won’t agree to joint bankruptcy
If your spouse won’t agree to a joint bankruptcy, you can still file bankruptcy on your own. When your debt is discharged, the creditors would then start collection efforts for the entire debt against your spouse (since the debt is the responsibility of both spouses). The divorce court only has the authority to assign debt between spouses, so in cases like this, it cannot order you to pay the discharged debt. The divorce court also cannot prevent creditors from going after your spouse for the debt. Usually, the spouse who didn’t want to file will join in the bankruptcy case because of this.
If your spouse files bankruptcy during a divorce
If your spouse files for bankruptcy while your divorce is pending, any financial matters of the divorce would be included in the “automatic stay.” The bankruptcy court would then have to give permission for the divorce to move forward. Keep in mind – child support would not be stayed, since it isn’t included in bankruptcy proceedings.
What if your spouse files bankruptcy after the divorce
Many times, a spouse will file for bankruptcy after a divorce is final. Bankruptcy law is clear, and any “support” is not included in debts that are discharged. Because of this, child support and alimony are protected and cannot be erased or forgiven.
Can divorce attorney fees be discharged with bankruptcy?
In most cases, any amount that a spouse is ordered to pay towards the other spouse’s attorney fees is considered in the “nature of support.” Like child support and alimony, any support fees are non-dischargable.
Call Rubin & Associates for a free consultation
Bankruptcy can be complicated, and it’s even more complex when partnered with a divorce. Call us at 214-760-7777 for a free bankruptcy consultation. We’ll listen to your financial situation and walk you through all of your options, making sure you fully understand all of your choices.