Tuesday, June 19, 2012

Divorce and Bankruptcy: Should I File For Both at the Same Time?



It’s no secret that money problems are one of the leading causes of divorce.  In fact, financial woes are often what couples state as the reason their differences became irreconcilable.  Therefore, the situation often arises that divorce and bankruptcy are considered simultaneously.  While it’s possible to file for both at the same time, it’s important to keep in mind that divorce and bankruptcy are two completely separate legal processes, and each must be handled separately. 

In fact, if you file for a bankruptcy while you are in the middle of the filing process for divorce, the divorce proceedings can actually slow down your bankruptcy.  And while the court handling the divorce will be able to make decisions regarding custody, child support, and alimony while the bankruptcy process is happening, it will have no jurisdiction over the couple’s mutual property – only the federal bankruptcy court will have control over that. 

Also, bankruptcy and divorce can be tricky when it comes to jointly owned debt.  If you are required to pay off certain debts as part of your divorce decree and your bankruptcy discharges these debts, your creditors could still go after your spouse if his or her name was on the debt.  Your spouse can then take you back to divorce court to recover the debt, which will likely be granted since it was in the original divorce decree.  Chapter 7 and Chapter 13 bankruptcy also does not discharge child support or alimony that is owed to your spouse as part of the divorce decree. 

The best thing to do is to wait until the divorce is finalized before you begin your bankruptcy process.  When you do it this way, the bankruptcy court will look at your required alimony and child support expenses, and consider these when determining your required monthly expenses.   

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