Debt, Divorce and Bankruptcy - What Are You Responsible For?
A divorce involves some very complicated issues:
• Who gets the house?
• Who pays for the house?
• How are the debts going to be divided?
When it comes to divorces, it gets messy when either party has
a significant financial loss at stake. One big myth about divorces and
debt is that you can pass the debt to the other person. While
you can divorce the spouse, you can’t divorce the debt that incurred
during the marriage.
Both parties are responsible for the debts that they incurred during
the marriage. While a judge may divide the debts up between the two
parties, the creditor doesn’t have to follow it. If the debt includes
both parties’ names, the credit can go after both even after the
finalization of the divorce. If one parties files for
bankruptcy protection after the divorce, the creditor is going after
the person who didn’t file for the bankruptcy protection.
Why Are You Responsible
For The Debt?
The couples’ financial situation is what creditors took into
consideration when they loaned them the debt. It’s possible that you
incurred debt without your knowledge and consent, but creditors don’t
know this and will still go after you for the debt.
The Correlation Between
Divorce and Bankruptcy
When you get divorced, you may suffer a serious financial problem. This
may force you to start the bankruptcy process. If one party looks to
file for bankruptcy, it may be a wise idea for both parties to file for
bankruptcy protection before the divorce is finalized. This ensures
level ground for both parties and property to be equally divided.
A spouse has the option to release a property division responsibility
instead of financial support, so long as the parties agree. However, if
a spouse doesn’t agree, the debt stays intact. The bankruptcy court
must sign off on any agreements.
How Does A Bankruptcy
Affect A Divorce?
When you choose to file for bankruptcy during a divorce, the assets and
liabilities are affected until the resolution of the bankruptcy. While
both court proceedings can be filed at the same time, the bankruptcy
proceeding is considered most important.
If one partner is financially more stable than the other partner and
worries that there could be financial consequences – such as being
responsible for the debt if their ex chooses to file for bankruptcy –
this needs to be brought up during the divorce proceedings. It’s
important you know what your financial obligations are in regards to
outstanding debt repayment. It’s also a good idea to know what the
bankruptcy laws are to protect yourself before, during and after the
divorce proceeding is over.
If the parties are not on good terms, a family law lawyer can help you
through the process. If they do get along, filing for bankruptcy
protection before the divorce can help both parties wipe their joints
debts out and boost their exemptions.
A good attorney can assist you in moving from a bankruptcy proceeding
to a divorce proceeding; it doesn’t matter if you’re talking to your ex
or not. It’s vitally important you know what your responsibilities and
rights are so that you can smoothly move forward with life.