In a Hurry? Dial +18-503-850-342 Now!Divorce decree and bankruptcy can often coexist and create additional complications in terms of rights, responsibilities, and payments made in full or on schedule owed from each spouse involved. Divorce can often complicate issues associated with payment agreements made during their marriage contract or legal agreements on both ends – creating uncertainty between you both regarding who bears what responsibility.
A divorce decree usually details who receives what property and who will assume which debts. But when one ex-spouse declares bankruptcy, marital debts that were assumed no longer your responsibility may resurface as creditors attempt to collect payments agreed to be made by your ex.
How Bankruptcy Affects Divorce Debts
First and foremost, bankruptcy cannot discharge debts owed by your former spouse for child support, alimony, and/or maintenance payments owed to you. They’ll still owe child support and can’t file bankruptcy without paying it either; similarly, if court orders require your ex to contribute towards attorney fees then that debt cannot be eliminated through bankruptcy either.
Your protection also extends to any debts acquired solely under your former spouse’s name – meaning you won’t have to cover their burdensome payments! You will no longer be responsible for debts acquired under his/her sole name.
Debt on joint accounts, credit cards, or loans is always bad news. Divorce decrees don’t take priority over bankruptcy filings when it comes to creditors contacting debt collectors; as long as money gets collected they don’t care who pays. Even if a decree specifies who should cover one joint account when payments stop coming through from one source the creditor might switch sources if payment from one ceases altogether.
Bankruptcy Under Chapter 7 or 13
You should feel protected if your former partner files Chapter 13 bankruptcy. In a Chapter 13 plan, debtors agree to restructure their debts through long-term repayment plans that usually span three or five years and end with debt discharge upon completion. Creditors cannot pursue cosigners during repayment terms but might try collecting balances after this term has concluded.
Your creditors could begin calling much earlier if your former partner files for Chapter 7 bankruptcy since Chapter 7 liquidates assets over certain limits to pay creditors owed by them. Your former partner won’t have liability if debts go unpaid! Chapter 7 can usually be completed within four months and creditors often seek payment from you as per family court orders assigned against him/her.
Understanding Harmless Provisions of Protection
Once a divorce decree has been issued, courts typically opt against revisiting its terms regarding debt and property division. But family courts could more readily act when such provisions exist in a decree.
Many divorce decrees contain provisions designed to indemnify each party, necessitating further preparation and court costs to enforce them. The relationship between a divorce decree and bankruptcy can complicate matters. Federal bankruptcy courts differ on their interpretation of whether divorce decrees that include “hold harmless” provisions create debt between spouses that is none-dischargeable through bankruptcy proceedings. If that court discharges your former partner’s debts but creditors come after you for repayment, reimbursement should be sought through family court. After you for repayment, reimbursement should be sought through family court.
In a Hurry? Dial +18-503-850-342 Now!How to Prevent Bankruptcy and Divorce
Instead of relying solely on “hold harmless” clauses for protection from bankruptcy during divorce proceedings, it would be prudent to avoid liability from bankruptcy by an ex-spouse before or at the time the divorce decree is entered. All joint debts should ideally be cleared away before this process commences; while this may not always be feasible or achievable it should always be implemented whenever feasible.
Consider bankruptcy before finalizing the divorce. Consult a bankruptcy lawyer if either spouse is considering filing bankruptcy before finalizing their separation agreement; an experienced professional may help assess which filing option would be most suitable. For instance, filing Chapter 7 joint bankruptcy could help eliminate debt and eliminate future problems.
Refinancing Property:
Refinance any joint-owned and financed properties such as family homes, vehicles and assets jointly held owned. If this cannot be accomplished before court orders are entered, include language in them requiring that any refinancing take place within a certain number of days after entry of the order.
Property Sales:
Sell any joint properties and divide up the proceeds equally after divorce. Both parties’ finances can often take an immediate hit and it may be challenging for someone who cannot meet mortgage payments to shoulder the responsibility alone.
Payoff Joint Credit Accounts:
Once it becomes clear that divorce may be imminent, both partners should open and use separate accounts as soon as possible.
Equalization Payments Should Never Replace Real Property Division:
When assets aren’t divided evenly among divorced spouses, one spouse might agree to make equalization payments as compensation. These equalization payments aim to restore equilibrium by substituting future payments in place of real property that was lost through division or sale. Although equalization payments can be discharged through bankruptcy filings, it would be best if assets were divided more equitably instead. Besides this, such arrangements should also be recognized by decrees as support instead of property equalization payments.
Reserve Spousal Support:
Essentially a hold harmless clause, this clause should be included in any divorce decree in order to give the family court authority over any subsequent spousal maintenance payments until non-support obligations have been fulfilled and provide financial support as necessary for those remaining spouses who may still require assistance financially.
Notify Your Creditors:
Review your credit report to identify all creditors that could owe money. Notify joint creditors via certified mail that any debts incurred after entry have no longer fallen within your sphere of responsibility.
Bottom Line!
Before going through with their divorce, most spouses wish to reduce financial entanglements with one another. This doesn’t just refer to child and spousal support obligations but can also issues related include to a divorce decree and bankruptcy filings from one partner. Being proactive about this risk will help ensure financial independence after separation occurs.
Contact Bruner Wright PA today if you are currently facing divorce or bankruptcy-related matters for an obligation-free initial consultation session.
Do Not Attempt to Navigate the Complex Waters of Divorce and Bankruptcy Alone!
Take control of your finances today by seeking expert guidance tailored to your unique situation. Contact us immediately for an in-person or phone consultation and explore strategies designed to safeguard assets while offering peace of mind.
Your fresh start awaits – allow us to guide you every step along the way!
Consultation with an experienced bankruptcy lawyer who can provide invaluable insight into available options and inform decisions, helping debtors navigate the process more easily while protecting their financial future. Call Bruner Wright today!
Schedule a free consultation with Bruner Wright now for quick action!
In a Hurry? Dial +18-503-850-342 Now!