Financial trouble plays a role in many divorces. Often, one or both parties are considering filing bankruptcy at the same time the couple is contemplating divorce.
Each spouse is equally responsible for debts incurred by either party while married. Debts will be divided equally between the two divorcing parties, but if one spouse becomes delinquent on payments, the creditor can legally try to collect the entire debt from the other.
Consider a couple who divorces and splits debts, after which the former husband files for bankruptcy. In this case, his former wife remains liable for the entire debt, not just her half. She can use the divorce agreement to compel her husband to pay his share, but if the husband simply cannot pay it, and the wife cannot pay the entire obligation, she remains stuck in debt.
In order for both the husband and the wife to escape the debt, they must both declare bankruptcy. Doing so decreases their debt burden, but it harms their ability to borrow. If the wife elects instead to sue the husband, her credit may not be affected, but she will remain in debt. Each option has serious downsides.
Divorcing couples who foresee any difficulty in making payments on debt should weigh all their options for bankruptcy and divorce proceedings at one time. They may find their best option is to declare bankruptcy jointly prior to divorce.
Court filing fees for joint bankruptcy are the same as for individual bankruptcy, and attorney fees for one joint bankruptcy are usually far lower than for two individual bankruptcies. In Florida, couples filing joint bankruptcy are allowed to double many exemptions. Exemptions are the assets that are protected from creditors and that remain the property of the bankruptcy filer.
For these reasons, bankruptcy before divorce may be a good idea, but it is not always the answer. A Chapter 7 bankruptcy is usually completed relatively quickly, and so is a workable option even if divorce is certain. A Chapter 13 bankruptcy, on the other hand, can last several years, and so is probably best filed after divorce.
The attorneys at Osenton Law Offices are well-prepared to help you understand the legal pros and cons of bankruptcy, divorce and legal timing.