Tuesday, February 11, 2014

How Does Bankruptcy Affect Divorce?

Divorce is the most frequently cited reason for declaration of personal bankruptcy. If you are considering both divorce and bankruptcy but uncertain as to how one affects the other, here are some general facts to keep in mind as you gather information.

Attorney services and saving fees

Some attorneys practice both family law and bankruptcy, and you may be able to save on attorney fees by using the same firm. The filing fees for bankruptcy are standard whether you file alone or jointly, so you might save money by filing while you are still married. However, if you file bankruptcy while still married, your attorney may not be able to represent you in your divorce, as this may be a conflict of interest.

Simplify division of assets and debts

When you file for personal bankruptcy you must list all of your assets and debts on your application. The bankruptcy process eliminates some of your debts, consolidates others and may require liquidation of some or all of your assets. If you then proceed to divorce, the process of dividing your assets and debts is greatly simplified. This being said, filing for bankruptcy could negatively impact your post divorce obligations.

Consider the timeline

Chapter 7 Bankruptcy involves the elimination of most of your debt and can be completed quickly, so it may be best to file before your divorce.

Chapter 13 involves the restructuring and repayment of debt, and can take up to three to five years to complete, so it may be best to divorce first, then complete the bankruptcy process.

How divorce affects debt

Divorce and bankruptcy both potentially deal with the assignment and obligation to pay debt, but in different ways. If you and your ex divide up the debts, you have both an obligation to the creditor and to one another by virtue of the divorce agreement. Should your ex declare bankruptcy and have his credit card debt discharged, that does not release you from paying your half if that was assigned to you. Likewise, if your ex defaults on a debt, his obligation to regarding payment of half the debt does not change. If you file for bankruptcy first, and your unsecured debt is wiped out, you still might have to agree to pay a portion of the discharged debt as part of your divorce agreement.

For sound advice regarding divorce, speak to an experienced divorce attorney at Murano & Roth, LLC. We can help you evaluate your debts and guide you through both of these events.

This blog posting and the information on our website is for general information purposes only. Nothing within it, within any responses, comments, emails, answers, blogs or attachments, should be considered legal advice. Our website and our blogs, including this blog, does not form any attorney client relationship, and this office does not represent you in any way. Keep in mind that since only very general information is provided on our website and within our blogs, you cannot rely upon any of the information as legal advice, as it might not apply to, or be accurate relative to your specific situation and facts.

By Jason D. Roth

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