1. Bankruptcy and Divorce: Five Considerations for Discharging Your Debt While Untying the Knot

    There’s no question that money problems often lead to divorce. Or that divorce sometimes creates financial difficulties that can only be resolved through bankruptcy. 

    What if bankruptcy and divorce – together – seem to be your only option? Five considerations:

    1. Bankruptcy before divorce can make it easier to clear up joint debt:

    “In the vast majority of cases, you (and your spouse) should get out of debt before filing for divorce. This almost always makes sense… All debts (joint and individual) will be discharged in the bankruptcy. There will be no lingering joint debt that the non-filing spouse will be responsible for…” (Frank Pipitone

    2. Waiting until the divorce is final has advantages, too : 

    “… having a final settlement order first might clear up uncertainties in the bankruptcy about assets and exemptions. Also, being single instead of married might help pass the ‘Means Test’, intended as an income barrier to getting a Chapter 7 bankruptcy.” (Malcolm Ruthven

    3. Whether you file before or after divorce, joint debt is a joint responsibility:

    “Most divorcing couples mistakenly believe they are each only 50 percent responsible to the credit card company on such debt… [E]ach spouse is responsible for the full balance on the card until that balance is repaid in full — regardless of which spouse incurred the charges and regardless of what amount each spouse paid to reduce the balance up until the time of the divorce.” (Pullman & Comley

    4. Bankruptcy does not allow discharge of support payments:

    “The Federal Bankruptcy Code exempts the discharge of ‘domestic support obligations’ as well as debts owed to a former spouse or child acquired as the result of a court-ordered separation agreement or divorce decree. Moreover, the Bankruptcy Abuse Prevention and Consumer Protection Act … gives domestic support obligations priority over other creditors, including tax debts.” (Collins & Collins

    5. Filing by a single spouse changes the stakes:

    “If both spouses do not file, the debts may not be fully discharged and the non-filing spouse could be legally responsible for all debts. Additionally, the bankruptcy court can independently examine any marital settlement agreement to determine if it injures creditors’ interests. For instance, the court will void any property transfers between spouses intended to defraud creditors.” (JAMS

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