Bankruptcy & Divorce

If you believe that you are headed for divorce, and you both have a lot of debt between you, it might be a good idea to consider filing for bankruptcy before you begin filing for divorce.


Proceeding in that order will pave the way for your divorce to proceed much more easily because it will allow you to get rid of some of your debt and to clear the way for a clean break. If you could file for bankruptcy, you will have a better idea of how to deal with the debt elements that will remain between the two of you. It will also mean that if your ex-partner files for bankruptcy later on down the road, you can be protected because you are going to take care of your debts before the divorce. Whatever may remain will be subject to court stipulations that clearly describe what should happen with the remaining amounts.

Simple system

When one or both of the spouses declare bankruptcy, any property that has been shared by both of them will become a part of the estate and will then be available to pay for all debts.

This will also mean that you have been granted an automatic break, which means that the creditors can’t hound you for money. Remember that this so-called "stay" does not prevent you from getting spouse or child support from any previous ex-partner. The next thing that will happen is that the bankruptcy court will decide what shared property is exempt from the bankruptcy, meaning that it cannot be sold in order to pay for your debts. Then, the divorce court can divide that property between you and your partner (or future ex-partner).

However Some Things May Require Counselling

If you are trying to negotiate property settlements, and also going through bankruptcy, you are going to be dealing with very complicated issues.

Some of the debts that might be related to a property settlement might not be wiped out during the bankruptcy, so you will still need to pay them. However, these debts can be wiped out if you can show that you can’t pay the debt and still take care or yourself and your children, or that if you wipe out the debt it is going to be better for you than the harm that would be done to the people that you owe by not paying it. This means that if you think your spouse is going to consider filing for bankruptcy after the divorce is final, you need to make sure that your finances are squared away so that you aren’t going to be faced with any more debts.