Divorce and Bankruptcy
It is often said that most divorces are caused by financial struggles. When a family is facing significant financial problems, the stress levels can be high and cause serious conflict. This type of conflict is difficult to recover from, especially if one of the spouses feels they are doing more to contribute to the overall financial health of the family. Most times, when money matters take a turn for the worse, legal action from lenders soon follows. Collection lawsuits and foreclosures are common collection actions, and can lead to loss of the family home or wages lost to garnishment or other legal proceedings. A lot of couples acquire debt jointly, but at divorce the obligations are divided. The unfortunate part to this is that not everyone pays what they are ordered to pay in a divorce setting, and this can leave one spouse or the other holding the bag for the obligation.
Will I Have To Pay for My Spouse’s Debts After The Divorce If I File for Bankruptcy?
One way to make sure that you are not held responsible for debt your spouse was ordered to pay in the divorce is to file a motion in your divorce case, seeking to have your ex-spouse held in contempt of court for the nonpayment. While this is a good idea, it does not always yield the desired results. This is because your lenders are not a party to your divorce, so any orders in that case are not enforceable against a lender. Another option is to seek the protection bankruptcy has to offer. When you file for bankruptcy, the debts in your name are discharged and no longer considered due. This includes debts that your ex was ordered to pay in your divorce, but on which he or she is failing to make payments.
The benefits to you if you make the choice to file bankruptcy during or after a divorce include:
- Stopping any collection efforts.
- Eliminating the ability of a mortgage lender to seek a deficiency from you on a foreclosed home.
The way bankruptcy eliminates these debts is by entry of the discharge. The goal of all bankruptcy cases is to obtain a discharge of debt, which is the legal mechanism that declares debts that have not been reaffirmed as no longer due. For more information about the interplay between divorce and bankruptcy, call our office today.