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Divorce & Bankruptcy go Hand in Hand?

Money problems in a marriage can lead to divorce.

Because many people going through a divorce are also under a lot of financial stress, they often think about the possibility of bankruptcy as a way to keep everything under control. Stress arises from having to pay lawyer and court costs and most importantly, having to cover the expenses of two households rather than just one.

Unfortunately, divorce and bankruptcyseem to go hand-in-hand for some people.

However, bankruptcy isn’t always the best idea, but if you decide to take that road, you won’t be alone. Bankruptcy filings have increased considerably over the last several years.

If you’re considering filing for bankruptcy along with your divorce, the way you word your divorce settlement can have a lot to do with how the bankruptcy affects your divorce – and vice versa.

How does bankruptcy and divorce fit together? Are you aware that there are different kinds of bankruptcy? The following are the way the issues settle out:

  • The Automatic Stay – Stops all efforts to enforce the collection of debt.
  • Discharge – Is your debt dischargeable? Can you get rid of it?
  • Paying support – Obligations from your divorce to pay support, including spousal and child, is not dischargeable in bankruptcy.
  • Property Settlement – The obligation of a property settlement may or may not be discharged, depending on the circumstances. The debtor must prove that he or she cannot pay the debt and still take care of themselves and their dependents – or that discharging the debt would result in a benefit to the debtor that outweighs the harm that would be caused to the former spouse by non-payment.

Debts that do not get discharged include:

  • Spousal and child support
  • Some obligations for a property settlement
  • Student loans
  • Debts arising from fraud or theft
  • Criminal restitution

If your spouse starts bankruptcy proceedings before your divorce is finalized, you might want to think about filing jointly, especially if most of your debt obligations are in both your names. It is important to note that a joint bankruptcy filing is typically not available to divorced couples, even if much of their debts are held jointly.

The law surrounding divorce and bankruptcy is complicated and each case is different. Whether youneed assistance with a divorce or custody dispute, or have fallen on hard times financially and need to file bankruptcy, the family law offices of Holstrom, Block & Parke can help.

We will sit down and discuss your needs and goals with you and then aggressively represent you in and out of court to achieve the best possible outcome. Contact us at one of our conveniently located offices in Orange, Riverside or San Bernardino Counties.

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