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Bankruptcy | Divorce | Family

Can You File for Bankruptcy While Going Through a Divorce?

7 min read
Philip Ahn, Attorney

by Philip Ahn, Attorney

The short answer to this question is that nothing legally prevents you from filing for bankruptcy during a divorce. Some people do this to free up funds for legal fees or other expenses associated with the divorce. However, filing for bankruptcy may affect the outcome of your divorce. In some cases, creditors may place a lien on assets that a divorcing couple would otherwise share. Additionally, if one spouse files for bankruptcy and the other does not, it may create an imbalance in marital assets that could affect the division of assets in a property settlement.

Filing A Joint Bankruptcy Can Help You Save Money On Costly Filing Fees And Make The Divorce And Bankruptcy Process Easier Overall

Filing jointly with your spouse is often the most cost-effective and practical option. You can pay one filing fee and reduce the paperwork by combining resources. Filing a joint case can also help you save money on expensive legal costs since many attorneys will offer a discounted rate if you file jointly.

The Exemption Amounts In Bankruptcy And Divorce Issues

The exemption amounts in bankruptcy and divorce deliberations vary greatly by state, so it is important to consult a legal professional familiar with your location and the applicable laws.

A Divorce Decree In Divorce And Bankruptcy Cases

A divorce decree is a legal document describing the divorce’s terms and conditions. It includes information such as:

  • The division of assets
  • Child support arrangements
  • Alimony payments and other obligations each party must take on

Chapter 13 Bankruptcy

Chapter 13 bankruptcy can provide some divorcees with an effective solution. An ex-spouse can handle bankruptcy matters on their own, or they can file jointly with their partner. Chapter 13 bankruptcy is a reorganization of debt that allows ex-spouses to propose a repayment plan over three to five years. Chapter 13 classifies debt into two types—secured and unsecured—which will determine debt handling in bankruptcy.

Bankruptcy petitions can be a valuable tool for divorcing couples. Under Chapter 13 regulations, debt relief is available to individuals with a steady income who cannot pay their current debt payments.

Qualifying debts must fall within Chapter 13 bankruptcy requirements to be eligible for discharge. A dischargeable debt is one that you can eliminate through bankruptcy proceedings. Generally, chapter 13 debtors can discharge unsecured debts such as credit card debt, medical bills, and personal loans.

Applying For Divorce And Bankruptcy Can Be An Overwhelming Process

If you are considering filing for bankruptcy or divorce, it is essential to understand the process and its implications. Bankruptcy is a legal proceeding in which a debtor seeks relief from their creditors, allowing them to discharge some or all of their debts. Divorce is the legal process of ending a marriage or civil union.

Applying for bankruptcy and divorce can be complex and overwhelming, so seeking professional advice from a family law lawyer or financial expert is essential.

Bankruptcy Can Immensely Affect The Divorce Settlement Outcome

A spouse’s bankruptcy filing can have many consequences and implications that may not be immediately apparent. Bankruptcy can drastically alter the terms of a divorce settlement, often leaving one or both parties in difficult financial positions resulting from

  • Marital property division
  • Alimony
  • Child custody
  • Child support payments

When One Spouse File For Bankruptcy During Divorce

Additionally, a spouse’s bankruptcy will not affect the other’s credit score if they’re not co-debtors on any debts.

Filing for bankruptcy during a divorce may significantly influence marital funds division between spouses.

An ex-spouse may file for bankruptcy and list joint debts in the filing, which can impact the other spouse’s ability to pay those mutual obligations. Debt relief can be a crucial component of divorce, especially when bankruptcy comes into play.

A bankruptcy trustee during divorce will help ensure that all assets and liabilities are accurately identified and reported.

The bankruptcy estate also pays divorce claims, which may include alimony and child support payments.

Assigning Marital Debt To A Spouse

A divorce court can decide to assign the marital debt to either spouse, meaning that the divorce court judge will look at matrimonial assets and liabilities, marital income, and other financial factors to decide who should be responsible for the joint debt. The court may also consider any prenuptial agreements before the marriage began

The Consequences Of An Automatic Stay For Divorce Proceeding

The automatic stay provided by filing divorce proceedings or bankruptcy can be a powerful tool for stopping debt collection actions.

Filing For Divorce And Bankruptcy FAQs

If you seek answers regarding filing for bankruptcy during a divorce, a bankruptcy attorney has answered some of your questions.

Why Consider Filing Bankruptcy Protection During Divorce?

Filing for protection during divorce can offer individuals several financial benefits. It can help reduce or eliminate the individual’s debt, giving them a fresh financial start. It can also provide a more equitable division of assets between the two parties by addressing all marital debts before assets division.

What Impact Will Filing Bankruptcy Have On The Timing Of My Divorce?

The timing of your divorce may be affected if you choose to file bankruptcy before or during the settlement process. Depending on the type of bankruptcy you file, the family court may require you to go through a period of waiting and evaluation before your divorce’s conclusion. For example, if you file for Chapter 7 bankruptcy, it will likely take at least three months to discharge your debts.

During this time, creditors can make claims against your assets. Additionally, Chapter 7, Bankruptcy, may affect divorce deliberations, as it requires that the court approve any divorce settlements involving the property.

What Circumstances Justify Bankruptcy Filing Before A Divorce?

Sometimes, bankruptcy may be the best option to protect your assets and financial future before a divorce. It is essential to consider several factors before making any decisions.

  • First, filing for bankruptcy before a divorce may be beneficial if your spouse is likely to incur large debts in the course of a divorce. Some of these debts could be discharged through bankruptcy, preventing your spouse from transferring them to you during the divorce.
  • Additionally, filing for bankruptcy could help to keep your credit score intact and allow you to save money on attorneys fees associated with the divorce.
  • Filing for bankruptcy before a divorce may also be beneficial if you are likely to receive a large debt during the divorce process. Some of this debt may qualify for discharge through bankruptcy, which would help minimize your financial burden due to the divorce.
  • Finally, filing for bankruptcy before a divorce may be beneficial if you receive spousal support or alimony from your spouse. In some cases, filing for bankruptcy can help reduce or eliminate your marital support obligations, which could positively impact your financial position after the divorce.

Are You Aware Of The Credit Consequences When Your Spouse Declares Bankruptcy?

When one spouse files for bankruptcy, the other spouse’s credit can be affected. Bankruptcy petition filing could impact both spouses’ credit scores and limit their ability to obtain additional credit.

In a joint bankruptcy filing, both spouses must list their assets and liabilities on the joint petition, which could result in a negative hit to both credit reports, even if the other spouse is not a party to the bankruptcy proceedings.

Can Court Fees Be Written Off As Debt?

It depends on the circumstances. In some cases, it may be possible to have court fees written off as debt due to financial hardship or other extenuating circumstances if a person cannot pay court fees due to certain circumstances. However, court fees are usually not considered debts the same way as credit cards, unsecured debt, or medical costs.

Can Bankruptcy Eliminate Bankruptcy Attorney Fees?

The short answer to this question is no. Bankruptcy may eliminate some of your debts, but it does not eliminate the fees for the divorce attorney you hire to file your bankruptcy case. The divorcing spouses must pay the Bankruptcy attorneys for their services, and their charges are not dischargeable in a bankruptcy case.

Don’t Wait – Contact An Unbundled Bankruptcy Lawyer Now For The Legal Advice You Need!

Facing bankruptcy is scary, but you don’t have to face it alone. Bankruptcy is a complex legal process that can be difficult to navigate without the help of a bankruptcy lawyer.

For a fraction of the cost, an unbundled attorney’s fees start at only $500 and top off at around $1500.

Unbundled Legal Services

may not be appropriate for every case. Still, they can help you save money if you seek assistance with certain aspects of your divorce case, such as document review or negotiation. Contact an Unbundled Bankruptcy Attorney today who will help you understand your options and guide you through the bankruptcy process moving forward.

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