How Does Bankruptcy Work During a Divorce?

Going through a divorce is complicated enough. Adding bankruptcy into the equation can add more stress and complications. Whether you’ve already started the bankruptcy process mid-divorce or you are separated, many things need to be considered.

Filing for Bankruptcy Without Your Spouse

Anyone can file for bankruptcy on their own at any time, whether they are married, separated, or divorced. However, the following are some things you should know before deciding on the best way to proceed with your bankruptcy without your spouse:

  • Although personal bankruptcy will discharge your debts, it’s essential to keep in mind that creditors can still seek out the non-filing spouse to satisfy your debt obligations.
  • If you are legally separated, but not living together, you may file for bankruptcy without disclosing your spouse’s income.
  • If you’ve already started the bankruptcy process jointly and decide to separate mid-bankruptcy, you may be able to divide your bankruptcy into two separate cases.

Why You Should File for Bankruptcy Before Divorce

The ideal situation is to file for bankruptcy before your divorce, as going through the process of both legal proceedings can delay the distribution of assets or liabilities. If you aren’t on amicable terms, this may seem like a daunting request. However, if you are on amicable terms with your spouse, you can jointly wipe out debt that you have incurred together, thus increasing the exemption amount. Filing for bankruptcy before divorcing can simplify many debt issues and property division.

Debts That Cannot Be Included in Bankruptcy

While you and your spouse may be able to discharge medical bills, credit cards, and other unsecured debt, the following are not eligible for discharge through bankruptcy:

  • Spousal or child support
  • Fines and penalties such as speeding tickets and criminal restitution
  • Student loans
  • Retirement plan loans
  • Secured loans on which you have stopped making payments
  • Certain income tax debts
  • Certain property taxes
  • Debt incurred post-bankruptcy
  • Debts not listed in your asset case

When to Contact a Bankruptcy Attorney

If you and your spouse are moving forward with a divorce as well as considering bankruptcy, it’s imperative to contact an experienced bankruptcy attorney as soon as possible. A bankruptcy attorney can evaluate your financial situation to determine the best course of action.

If you and your spouse are facing mounting debt, bankruptcy could be the solution. Contact Wadhwani & Shanfeld at (800) 996-9932 today for a free consultation.


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