- Author: George Haines
- Published
Bankruptcy in itself can be a very complicated maze of a process. If you are going through divorce, the whole thing can evolve into an even more complex monster when you take into consideration the issues of community debt and separate debt. Compared to bankruptcy, divorce settlements and orders may not discharge a couple’s obligations to third parties. Thus, if there is an enormous amount of community or separate debt, bankruptcy may be the most apt course of action to discharge the debt, but this is not without caveats.
Timing of a bankruptcy case.
A potential or subsisting bankruptcy case may significantly impact the timing of a case for divorce and any property interests. Bankruptcy will affect your divorce and divorce will affect your bankruptcy – this much is sure – thus, depending on the present circumstances, you may want to file for bankruptcy before or after divorce. For example, filing for bankruptcy before a divorce is finalized can put give you legal headaches if you start dealing with marital properties in particular ways without obtaining prior go-ahead from the family law judge.
How bankruptcy affects obligations related to divorce.
Generally speaking, divorce-related obligations e.g. alimony, child support, or maintenance, are not dischargeable under bankruptcy law. This means that you are still bound to make payments mandated by the divorce decree. Under the law, however, there are certain situations where these obligations may be discharged.
While common sense dictates that every case is treated differently, there are common situations that occur in filing for bankruptcy during a divorce. One such scenario is when the spouses agree on the terms of the divorce and both acquiesce to jointly file for bankruptcy. In such a case, all qualified debts incurred during the marriage, called as community debt, and separate debt, that which is brought into the marriage by each of the spouses, is discharged in compliance with bankruptcy law. This is usually the ideal scenario since it streamlines the divorce process. To further simplify the divorce proceedings, the spouses may likewise opt to pursue the bankruptcy case before filing for the divorce.
Another common scenario is when the spouses cannot agree on how to divvy up the property and debt so they decide to file for bankruptcy separately, or only one of the spouses elects to file for said case. In this situation, there is a more than likely chance that the divorce proceedings will be brought to a temporary halt until such time that the bankruptcy is resolved. In other times, the better option is to wait for the settlement of the divorce before filing for bankruptcy. This affords each of the spouses the chance to gauge exactly what property and debt are under their respective names, which can help them assess whether or not bankruptcy is in their best interests in the long haul.
Freedom Law Firm is here to help.
Bankruptcy is often the last but necessary resort. It is a delicate and complex proceeding, and you want someone with plenty of experience to consult you and guide you through the process and help you determine the scope of the discharge.
In many cases, unless a party in interest files a complaint objecting to the discharge, the bankruptcy court may issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors.If you would like to find out whether bankruptcy is the right option for you, please request a call-back by submitting a short online form. All initial consultations are free and confidential.
