Divorce and Bankruptcy

Divorce and Bankruptcy

The interplay between a past, ongoing, or future divorce and a Chapter 7 or Chapter 13 bankruptcy is one of the most complex considerations to explore with us when you decide to move forward with The Hilla Law Firm in a bankruptcy filing.

A common provision in divorce judgments is a provision determining which party to the divorce must deal with which of the debts that arose from the marriage. Credit cards in the names of both divorcing partners is often decreed to be “joint marital debt” in the divorce judgment, which may award responsibility for the payment of the debt to one or other of the separating spouses. Such debt, once cemented in the divorce judgment, is usually not dischargeable at all in a Chapter 7 bankruptcy. It is still possible to discharge it through a Chapter 13 bankruptcy in many circumstances.

Nevertheless, a to-be-divorced spouse may elect to file a bankruptcy before the divorce is completed in order to take this issue off the table in the divorce—and to ensure the debt’s dischargeability in bankruptcy. Occasionally, divorcing spouses agree that a pre-divorce bankruptcy is in their best interest, though it is often not possible for the same attorney to represent them both.

However, a pre-divorce bankruptcy may also be dangerous depending on the intended distribution of assets, income, retirement accounts, and other joint marital asset property. In such cases, it may be better to wait and consider a bankruptcy after the divorce, once it is clear who is getting what property and how much support income or support payment responsibility.

If you have already been through a divorce, we will need to examine your judgment of divorce at your initial consultation in order to determine whether there is an issue with the dischargeability of any possible marital debt.

Divorce and bankruptcy can be mutually useful and accomodating processes under the right circumstances and depending upon your goals for each.

If a divorce is yet to come for you, contact The Hilla Law Firm, PLLC to schedule a free, initial consultation as quickly as possible so that we can chart a course of action for you that may recommend the bankruptcy before your divorce, afterward—or not at all.

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