Divorce and bankruptcy often go hand in hand

Divorce and bankruptcy often coincide.

For some couples, the financial stress of divorce (including having to establish two separate households where once there was only one, needing to split joint debts as part of the divorce decree, the need to make child support or alimony payments and the burdens of paying household expenses alone instead of jointly) can lead to one or both of them filing for bankruptcy soon after the divorce is finalized. For others, the debt struggles that led to their marriage ending will result in a bankruptcy filing independent of the situation resulting from the divorce. Regardless of which one comes first, divorce or bankruptcy, the fact remains that they often go hand in hand.

What you need to know if you are contemplating both divorce and bankruptcy, however, is the impact that one can have on the other. You'll need to determine which to file first, what effect a bankruptcy will have on your divorce decree and whether you and your spouse should file bankruptcy separately or jointly.

What should you do first?

Like so many other things in the law, the answer to this question is "it depends." Some people will benefit from filing for divorce first and having a determination be made about which debts he or she will ultimately be legally responsible for before filing for bankruptcy to discharge them.

It is important to note, however, that some joint debts might not be fully discharged if only one party to the debt files for Chapter 7 or Chapter 13 bankruptcy. If, for example, you and your husband have a joint credit card, your responsibility for the debt may be wiped out by a bankruptcy filing, but your husband might still be held legally liable by the credit card company and forced to pay the entire debt unless he also files for bankruptcy protection.

The credit card company - or another debtor - won't care that your divorce decree said that you were responsible for only paying half of the bill. Joint debts are held by both parties, and each could be held accountable for the entire amount. This doesn't mean that your husband couldn't file a civil claim against you to get you to pay him back, just that the credit card company isn't a party to your divorce settlement agreement, so they aren't bound by its terms.

It is also important to note that, if you have legally discharged debts through bankruptcy beforehand, you shouldn't agree to pay them as part of a divorce decree or separation agreement. Doing so could, in effect, nullify the relief offered by the bankruptcy discharge and "revive" the debt.

Only you, with the advice of an experienced bankruptcy attorney, can ultimately decide whether bankruptcy is right for you. There are many questions to be answered when divorce and bankruptcy interact, and those questions are best addressed by someone with experience handling these complex cases. For more information, contact the Cincinnati law office of Goering & Goering, LLC. Call them at 513-621-0912 or send them an email to get started today.