How Does Bankruptcy Affect My Divorce?
Often times, unfortunately, divorce and bankruptcy happen about the same time. Either event is catastrophe enough, but together they are truly heart wrenching. Nonetheless, it is important to take a quick look at the impact bankruptcy can and does have on divorce both during the divorce and after the judgment for divorce and the settlement agreements are entered.
First, while you can do a bankruptcy during or before the divorce is final and/or after the final divorce orders are entered, we prefer (unless both parties are joining in the bankruptcy) to do the bankruptcy, with all parties full knowledge, after or very near the entry of the final divorce orders. It is extremely important that your divorce attorney is knowledgeable about the correct language that should be in the divorce settlement papers to protect both parties in the divorce and bankruptcy.
Second, all obligations agreed to in the divorce settlement are what we call non-dischargeable in a bankruptcy proceeding. It is crucial that you understand what obligations you are undertaking in the divorce agreements. Even if you declare bankruptcy, if you agreed to pay the debt or obligation in the settlement agreements, the bankruptcy discharge will not apply to those debts. You can be sued in divorce court and have your assets and/or income taken to satisfy the debt even if the original creditor has been discharged.
For example if you file bankruptcy and discharge joint credit card debt, the credit card company will not be able to sue you or collect the debt it may however be able to sue the joint debtor. If you agreed to pay the debt in the divorce papers you will not be able to discharge the debt.
Third, the complexity of the interrelationship of bankruptcy and divorce is immense. However, bankruptcy can be a way to resolve debt in a divorce preceding that would otherwise make the financial settlement in the divorce impossible. The one thing for certain in divorce is the minute the two parties establish two households the core expenses double and there never is enough money. While bankruptcy should be the last resort, it can allow both parties and their children to restructure their lives so they can look to the future with some hope and peace of mind.
Contact Us
Contact bankruptcy attorney C. David Ward or Brian J. Russell for a consultation today.
Illini Legal Services is engaged in the private practice of law and is not a public legal aid agency. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.
