Family Law and Bankruptcy

Posted on September 12, 2011 at 3:27pm by

Any married couple will tell you that one of the most challenging aspects of marriage is dealing with finances and, at times, debt. Because of that, there are no two areas of law more inter-connected than Family Law and Bankruptcy Law. Debt is a major factor when considering a divorce. How you can handle both a divorce and possible bankruptcy depends on the couple’s financial situation and long term plans.

If they qualify, a couple can file for a Chapter 7 bankruptcy before they file for divorce and remove many, if not all, debt considerations from their divorce. This is by far the easiest and wisest choice for a couple if they qualify and are able to work cooperatively. Chapter 7 also allows the couple to surrender their home if they so choose and not worry about a deficiency balance.

If the couple does not qualify for a Chapter 7, they can still file a joint Chapter 13 petition before they file for divorce. During the 5 year Chapter 13 repayment plan, the couple could file for divorce and move on their separate ways. The Trustee would allow them to remain in 1 single case but live completely separate lives. A joint petition as a married couple would save the couple additional attorney fees and filing fees that would come with two separate bankruptcy petitions.

If a divorcee is considering filing for bankruptcy after the divorce is finalized, he or she must carefully examine the divorce decree before filing. Many divorce decrees require one spouse to assume responsibility for a certain marital debt, such as a credit card or, on occasion a home loan or car loan. The spouse’s responsibility is a factor in any bankruptcy proceeding. That spouse has a duty to remove his or her ex from that loan before filing for bankruptcy. If the spouse does not remove his or her ex, and files for bankruptcy anyway, the ex will remain liable for the balance of that loan or for that credit card. While the spouse may still receive his or her bankruptcy discharge, he or she would be in contempt of the divorce decree and could be taken back to Court and forced to reimburse his or her ex for the debt.

Bankruptcy is always an option for couples, whether married, separated or divorced. For some, it will remove a major stress from the upcoming divorce and streamline the process for both spouses. A consultation with a Kansas City Bankruptcy attorney at The Sader Law Firm can help you decide with your situation. Contact one of our experienced attorneys today.

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