How can filing for bankruptcy affect my divorce?

On behalf of Johnson, Sclafani & Moriarty, Attorneys at Law posted in High Asset Divorce on Friday, January 15, 2016.

As the adage goes, when it rains, it pours, and such is often the case with divorce and bankruptcy.

Couples who file for divorce often find themselves filing for bankruptcy within a short time as well. Statistics indicate that over 90 percent of bankruptcy filings are made by those who have been through a divorce that induced financial hardship.

It’s easy to see a link between the two, as expenses that were once shared are now doubled, and one spouse may be ordered to pay child or spousal support, further depleting their coffers. Those used to leading two-paycheck lifestyles now forced to get by on one breadwinner’s earnings can find themselves in financial hot water.

Timing is important with both divorce and bankruptcy filings, as a bankruptcy petition filed before a divorce is finalized can affect both parties and their assets and debts.

Creditors are not considered parties to divorce agreements, so splitting spouses are still responsible for joint debts, even when only one spouse declares bankruptcy. Filing a joint bankruptcy prior to filing for divorce is often a good decision. Both parties can get a fresh yet separate start and dodge the hassles of negotiating the debt and asset division portion of the divorce, as much of this will be settled during the bankruptcy proceeding.

It’s important to file a joint bankruptcy prior to finalizing a divorce if that is the couple’s intention, as joint bankruptcy filing are normally not allowed by divorced spouses, even when a good deal of their debt was accrued together.

Those planning bankruptcy as well as divorce can learn which course is best by consulting with both a family law attorney and a bankruptcy lawyer before making a legal move.

Source: womansdivorce.com, “When Divorce and Bankruptcy Collide,” accessed Jan. 15, 2016