Attorney at Debt Advisors Law Offices
Practice Areas: Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, Stop Foreclosure
Divorce can make an already difficult financial situation even harder. You may be dealing with a mortgage, credit cards, loans, and shared property while also figuring out how to separate your finances.
For some couples, Chapter 7 bankruptcy before or after divorce may help with debts they cannot afford to pay. The timing can matter, though.
A divorce decree can say which spouse is responsible for a debt. But it does not always stop a creditor from collecting from the other spouse. Knowing how the two processes work together can help you avoid problems later.
This guide explains how Chapter 7 and divorce can affect each other, including when to file, what happens to shared debts, and how bankruptcy can affect property during a divorce.
There is no one answer for every couple. It depends on your debts, income, property, and whether you and your spouse can agree on how to handle the bankruptcy.
Filing together before the divorce may make sense when both spouses have a lot of shared debt and both qualify for Chapter 7.
It can help deal with shared credit cards, medical bills, and personal loans before you divide your property. It may also make the financial side of the divorce easier to sort out.
But filing together may not work if you and your spouse disagree about money, property, or bankruptcy.
Some people wait until the divorce is over and handle bankruptcy on their own.
That may make more sense when your income changes after the divorce, one spouse has most of the debt, or you and your spouse cannot agree on filing together.
The downside is that joint debts may still affect both spouses if only one person files.
A divorce agreement can decide which spouse should pay a debt, but it does not remove the other spouse’s responsibility to the lender.
Chapter 7 can wipe out many types of unsecured debt. This can include credit card balances, medical bills, personal loans, and collection accounts.
After you file, the automatic stay generally stops many collection efforts, such as creditor calls and lawsuits.
The process usually involves:
You can learn more about the Chapter 7 bankruptcy process.
A common misunderstanding is that a divorce decree protects a spouse from debt collection. It does not. A divorce decree may state that one spouse must pay a specific debt. However, if both spouses signed the original agreement with a creditor, the creditor may still pursue either person.
For example:
The divorce court can decide responsibility between spouses, but bankruptcy law determines whether a debt can be discharged.
Some divorce-related debts cannot be wiped out through Chapter 7. Child support and alimony generally remain.
Certain debts from a property settlement may also survive bankruptcy. Other debts, such as many credit cards and personal loans, may qualify for discharge.
|
Debt |
Chapter 7 |
| Credit cards | Often dischargeable |
| Medical debt | Often dischargeable |
| Personal loans | Often dischargeable |
| Child support | Generally not dischargeable |
| Alimony | Generally not dischargeable |
| Property settlement debts | Depends on the debt |
The exact type of divorce-related debt matters, so it is important to look at how the obligation was created and what it is meant to pay for.
Divorce and bankruptcy both involve property decisions.
Before filing Chapter 7, consider:
Bankruptcy exemptions may protect certain property, but the amount of protection depends on the asset and available exemptions.
If property division is unfinished, filing bankruptcy may create additional complications.
Yes. But filing while a divorce is still going on can make things more complicated. A Chapter 7 case creates a bankruptcy estate that can include certain property you own. That can affect property issues in your divorce.
Bankruptcy generally does not stop the family-law parts of a divorce. Matters such as child custody, parenting arrangements, and child support can continue.
Before filing during a divorce, understand how bankruptcy could affect your property and debts.
If you are dealing with divorce and bankruptcy at the same time, start by getting a clear picture of your finances. Make a list of your debts, shared accounts, property, and any debts you personally guaranteed.
It can also help to involve both a divorce lawyer and a bankruptcy lawyer. Each handles a different part of the situation, and decisions in one case can affect the other.
Mediation may also help when you and your spouse need to agree on debt or property issues. Most importantly, be open about your finances. Hiding assets or debts can create serious legal problems.
Once the divorce and bankruptcy issues are settled, you can focus on rebuilding your finances. This may include rebuilding your credit, creating a budget, and planning for future expenses.
No. One spouse can file Chapter 7 alone. However, review joint debts and shared property before you decide.
The filing spouse may have the debt discharged, but the other spouse may still be responsible for the joint debt.
It can. If you share a loan or credit account, you may still have to pay it even if your ex receives a bankruptcy discharge.
No. Child support and alimony generally continue after a Chapter 7 filing and are not discharged.
Not necessarily. The timing depends on your debts, property, income, and whether filing alone or together makes more sense.
Bankruptcy and divorce can affect the same debts and property, so the order in which you handle them can matter.
If you are thinking about Chapter 7 before, during, or after a divorce, Debt Advisors Law Offices can help you understand how bankruptcy may affect your debts and property.
Schedule a free consultation to talk with an attorney about your situation.
Learn about bankruptcy protections, types of bankruptcy, how to get started, what to expect, and who to trust. Filing bankruptcy is the ONLY way to completely eliminate debt. If bankruptcy is right for you, it offers powerful protections that cannot be achieved through alternative solutions such as hardship relief, loans, or debt settlement.
