Heading into Divorce Bankruptcy

It is the worst time of your life, and you are now faced with the question of divorce bankruptcy. It’s not bad enough your relationship is falling apart, but so are the finances of you and your partner. Through the pain of a relationship breakdown, there is so much to think about. You are emotional and making decisions is the last thing you want to do.

What will you do if your ex partner does not meet the terms of the divorce settlement? What if they decide to declare bankruptcy after your final settlement? How will this affect you?

What Should You Do?

There is no easy answer. Take a look at the level of combined debt (mortgage, joint loans, etc) between you. How are you going to manage it? Maybe filing for bankruptcy before divorce is worth considering. It is cost-effective when you file together, can simplify the process and make it easier to sort out the remaining debt during the divorce settlement.

How will Bankruptcy Affect You?

The minute you file for bankruptcy, all your assets become community property held in trust to pay any debts. The court grants an automatic stay, which prevents your creditors from harassing you to collect their money.

But, you can still be liable for family support. When filing for spousal support from your partner during the divorce proceedings, you may have to provide proof the bankruptcy court does not have jurisdiction over your family support application.

Before a divorce court can rule on a division of assets, the bankruptcy court must first rule those assets as exempt from the bankruptcy estate.

Difference between Support and Property Settlement

How courts determine the difference between property settlement and family support varies from country to country. Make sure you check up what that means for you.

Sorting it all out

There is so much to consider when going through a divorce and a bankruptcy. The pressure and emotions run hot, and the stakes are high.

Bankruptcy court does not consider property settlement debt as dis chargeable. This means you are still responsible for the debts incurred as part of a divorce. In some cases the court will show leniency, but will address these case by case.

Make sure your divorce settlement is a carefully worded to help protect you if you ex partner files for bankruptcy after the property settlement is final.

This is just one of the dreaded bankruptcy questions you are asking about.

Bill Baxter, who has provided more in-depth information at this link on bankruptcy questions.