Divorcing Debts

: Chris Lee Law Firm

  Filed under: Divorce

It is unfortunate that many marriages often suffer at the hands of unmanageable debt. Money troubles are the number one threat to many marriages, often leaving the couple facing a tough time when it comes to managing these debts in a divorce. As for filing bankruptcy, there are some things to consider about the timing of the filing with the timing of the divorce proceedings.

Division Of Debts

When you divorce a spouse, the court will divide the debt obligations and assets among the two parties. Typically,  jointly held debts will be divided equally, giving each spouse responsibility for a portion of the debt. Individual held debts are generally assigned to the  person who claimed responsibility of the debt prior to the marriage or whomever is the sole responsible party on the account. While there are some exceptions to this rule, here is how divorce can affect the joint or individual debts.

Jointly held debts pose a problem if the bankruptcy filing comes after the divorce. The reason is that the filing spouse may be granted a discharge of debt liability from this debt, but the non-filing spouse is not. This often leaves the non-filing spouse solely liable for the debt in the eyes of the creditor, who is then free to pursue them for collection.

Individual debts after a divorce generally have no impact on the prior spouse, unless the non-filing spouse has possession to secured assets. If the divorce proceeding divided secured assets to a non-filing spouse before the bankruptcy, the creditor could still liquidate the asset in a ex-spouse’s Chapter 7 case.

Filing for bankruptcy on an individual or jointly held debt prior to divorce can have the debts resolved before any further division of responsibility is warranted in the divorce hearing. If the debts are absolved in bankruptcy prior to the divorce, both parties could be better protected against future liability of the debt or asset liquidation.


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