The Intersection of Bankruptcy and Divorce

By themselves, going bankrupt and getting divorced are two of the most difficult experiences a person can go through.  When the two come together however, it can be nothing short of crushing.  The truth is, that many people cite divorce as a major cause of personal bankruptcy.  However, filing for bankruptcy is extremely complicated when coupled with divorce. 

There are two bankruptcy filings that directly relate to family law - the Chapter 7 and the Chapter 13. More info on each of those here.  In a nutshell,  Chapter 7 cases, the debtor’s assets are all included in a bankruptcy estate, and a trustee sells off assets to pay creditors.  The debtor’s obligations are discharged unless they are exempt (i.e. student loans, spousal and child support obligations, and so forth).  In Chapter 13 cases involve adjusting the debts of a person with income and attempts to repay all or part of debts.  Typically a repayment plan over a period of years is ordered.

If both spouses are on good terms and bankruptcy appears evident, filing for it before the divorce can pay dividends. It may help to wipe out joint debts and bad contracts (such as high car payments).  

If you have questions about either divorce, whether or not bankruptcy is involved, contact our family attorneys in New Bedford.  If you simply want more info on bankruptcy, Bank Rate has a ton of information.