How Will Filing for Bankruptcy Affect My Divorce?

Divorce can result in significant financial impacts on both spouses. Filing for bankruptcy can relieve you and your spouse of some monetary obligations.

However, filing for bankruptcy does not end all financial obligations and create additional financial obstacles after divorce. Working with an experienced Broomfield divorce lawyer is vital to receive an encompassing analysis of your assets, debts, and income before filing for divorce or bankruptcy.

Can I Protect My Assets When Filing for Bankruptcy and Divorce?

The order in which you file for bankruptcy and divorce may impact your assets significantly. Filing for bankruptcy before divorcing may allow you to maximize the protections available under numerous bankruptcy exemptions. Common exemptions, like the homestead exemption and those in this Act, may enable you to protect equity in an asset. Doubling the amount of bankruptcy exemptions for an asset may be possible because many exemptions are per person.

Divorcing before filing for bankruptcy may allow the court to allocate assets to each partner. However, the marital assets you assume may become vulnerable to creditors when the divorce process begins. While divorcing allows for the division of assets between spouses, bankruptcy will liquidate assets that bankruptcy exemptions do not protect. Divorcing before filing for bankruptcy may limit the type of bankruptcy you may file under.

A divorce can also take longer, depending on when you file for bankruptcy. Filing for bankruptcy triggers an automatic stay that prevents the division of assets and protects assets. Ultimately, deciding when to file for bankruptcy and divorce is unique to your situation and finances. The size of a household impacts some types of bankruptcy.

How Will Bankruptcy Impact Marital Debt?

If you have unmanageable debt, filing for bankruptcy removes dischargeable debts, allowing individuals to start over from a more financially stable standpoint. The Court may also order a partner to pay the debts of a former spouse in a divorce decree. While the order can relieve some debt, a former partner must pay the debts.

Court orders do not change whose name a debt is in. If a former spouse fails to follow court orders to pay debts in your name, the creditor targets you instead of your spouse. A spouse’s failure to pay or inability to pay court-ordered debt in your name can impact your credit score, lead to collections, and lawsuits. Filing for bankruptcy may still be necessary.

How Will Filing Bankruptcy Affect Me After Divorce?

Divorcing can reduce available income and decrease available assets. Each partner in a former marriage may experience impacts to their credit scores due to the loss of combined incomes and the division of assets after a divorce.

Filing for bankruptcy can further impact your credit and purchasing power. A bankruptcy remains on a credit report for up to 10 years, potentially making the years following a divorce financially challenging. However, bankruptcy may still be an essential step.

The type of bankruptcy you file can also affect the financial burdens you experience. For example, filing Chapter 13 bankruptcy requires the repayment of debts over 3 to 5 years. After a divorce, being able to pay court-ordered payments, such as alimony and child support, in addition to repaying debt, can be significantly challenging. In conjunction with financial advisors, a Broomfield family law attorney can offer guidance for filing for bankruptcy and divorce while minimizing their economic impact.