Jenkintown Divorce Attorney • Bankruptcy
In today’s economy, it’s not uncommon for divorce to go hand in hand with filing for bankruptcy. Faced with debt on credit cards, an upside down mortgage, car loans, or medical bills, filing for Chapter 7 or Chapter 13 bankruptcy may be the best way for some people to get out from under crushing debt. Consequently, the question arises: when should I file for bankruptcy – before or after my divorce? And, what should I do if my soon-to-be ex-spouse decides to file for bankruptcy during our divorce?
In general, if you and your soon-to-be ex are on relatively good terms, it is best to file for bankruptcy before your divorce so you are both on similar financial ground. Additionally, if your income is too high to file for Chapter 7, you will need to create a Chapter 13 repayment plan together. In both cases, filing for bankruptcy prior to divorce allows you to address issues related to marital debt that can often complicate the divorce process.
Unsecured Debt, Credit Cards, and Marital Debt
Perhaps the most important point to remember when considering divorce and bankruptcy is your obligation to creditors. When you co-sign a car loan, open a joint credit card account with your spouse, or have both your names on a mortgage, you are responsible for any debt on them. Regardless of whether or not you ever used a joint credit card, drove your husband’s or wife’s car, or moved out of the house months ago, you can be held legally responsible link to www.nolo.com/legal-encyclopedia/divorce-bankruptcy-which-comes-first.html for any debt still owed on them.
So, even if your ex agrees to pay off the remaining debt on a credit card he or she always used or, pay off a car loan on a car he or she always drove, if your name is on the line of credit, collection action can be undertaken against you should your ex default on the account. Here, the terms of your divorce settlement cannot cancel out or protect you from legal obligations you have towards creditors on accounts you opened jointly.
Filing for Bankruptcy and Divorce
Keeping this in mind, if your soon-to-be ex files for Chapter 7 or Chapter 13 during your divorce, his or her unsecured debts (credit card debt, certain kinds of loans, medical bills) will be discharged or rolled into a repayment plan. However, if you don’t file for bankruptcy, creditors can still undertake collection action against you. As a result, this can complicate matters in divorce in regard to the division of marital property and marital debt.
For this reason, if you know your spouse plans on filing for bankruptcy during your divorce, you may want to consider your legal options in order to include terms in your divorce settlement regarding his or her financial responsibilities as a result. For example, you may want to lay claim to more marital property in order to help pay off some of his or her debt in order to avoid filing for bankruptcy yourself.
When Bankruptcy may be the Best Options available to You
In some cases, unfortunately, when one spouse files for bankruptcy during divorce, the other spouse may find he or she has to as well. Since a Chapter 7 or Chapter 13 bankruptcy can stay on your credit report anywhere from seven to ten years, it’s understandable that you may not want to file for bankruptcy as a result of your soon-to-be ex-spouse’s decision to do so. But, if you can’t pay your creditors and there is a danger you will lose your house, Chapter 7 or Chapter 13 may be the best option for you. At this point, you may want to file together as part of your divorce.
Protect Your Financial Interest during Divorce – Contact Joanne Kleiner
The financial consequences of divorce are important to life after divorce. Understanding how to protect you and your children’s interests now is essential when bankruptcy is a part of the process. To learn more about how we can help you protect your interests and rights, contact Jenkintown divorce attorney Joanne Kleiner today and schedule an appointment.