Bankruptcy and divorce often go hand in hand. The two are often referred to as cause and effect. Both are serious legal proceedings that require experienced legal counsel. The timing of filing either the bankruptcy petition or divorce complaint may be strategic. And, there’s more you need to know.
It’s no secret that some marriages end because of poorly maintained finances. There’s no law that says that spouses have to file for bankruptcy together. However, it may be more cost effective to do so as a couple.
See you divorce lawyer first. He or she likely has a rolodex with some names who can provide you with further advice if necessary.
Some will claim that it was the expense of the divorce process and its outcome that led them to bankruptcy. It’s important to understand what can and cannot be discharged in bankruptcy.
The Basics about Bankruptcy and Divorce
It was easy to see that Joanne was frazzled when she came for her first legal consult. Bill collectors were calling daily. Joanne was recovering from a long illness. Her husband wanted out of the marriage. Meanwhile, mail from collection agencies was piling up. Tears were streaming down Joanne’s face as she discussed her situation.
It seemed apparent that Joanne’s issues were twofold. She required legal protection from the debt collectors. In addition, the young mother needed assurances that her sons would receive adequate support from their dad. There was also the issue of prospective alimony. Thankfully, Joanne sought legal advice from a concerned and compassionate matrimonial attorney. He used his resources to refer her to other professionals who could assist her with their experience.
Nobody said ending a marriage was going to be easy. It’s even harder if the relationship has endured financial hardship. If it seems inevitable that both parties will need to file bankruptcy, it might make sense to go through the steps.
Some think of bankruptcy as a prospective way out of paying obligations. Certain responsibilities cannot be discharged in bankruptcy. Here’s the most important one under the Bankruptcy Code. Alimony and child support payments cannot be forgiven as part of a bankruptcy petition.
However, equitable distribution is another story. Equitable distribution debts are dischargeable for Chapter 13 bankruptcies. The same is not true for those who are granted Chapter 7 bankruptcies. Although we are not bankruptcy attorneys, we can tell you the basic differences as they apply to family law. Chapter 7 bankruptcy cases do not repayment plans; Chapter 13 bankruptcy cases are premised on them. In Chapter 7 cases, the court appoints a Trustee to sell off the assets to satisfy debtors.
Concerned about Divorce and Bankruptcy?
At the Law Offices of Sam Stoia, we realize that money problems are often a big cause of divorce. Sam’s finance experience has been quite beneficial to many of his clients. If you would like a complimentary consultation, please contact us.