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Bankruptcy and Divorce

Divorce is a stressful time, especially when it comes to finances.  Couples have carefully crafted a life and planned for a future together, often taking into account two incomes when considering how bills will be paid or purchases to make.  When spouses separate or file for divorce, they must come up with new solutions to pay their debts and make ends meet while living on just one income.  In some circumstances, one of the spouses may decide after the divorce that the debts and support obligations are simply too much, and may seek to have their debts discharged by filing for bankruptcy.

Bankruptcy and divorce often intersect, but they are two extremely different proceedings.  Bankruptcy is exceedingly complex, and it is common for bankruptcy attorneys to focus their practice on that sole area of law.  Moreover, bankruptcy is filed in federal court, while a divorce or other family law case is filed in state court.  Declaring bankruptcy allows for the person filing to be relieved of his or her obligation to repay some or all of his or her debts.  This can become complicated if the debts that a former spouse seeks to discharge are related to or discussed in a final divorce decree.

First and foremost, payments that are characterized in final divorce orders as either spousal support or child support are not dischargeable in bankruptcy.  This means that even if your former spouse owes you a lump sum for spousal support or has fallen behind in payments, he or she cannot get out of repaying that money simply by filing for bankruptcy.  Moreover, the former spouse must continue to make support payments even during the bankruptcy case.  This is different than other debts, as the spouse will be relieved of making payments on most other debts while the case is pending. 

If common debts held at the time of the divorce existed, then they are likely divided in the final divorce decree.  If your spouse was told to continue to make payments on a joint debt and seeks to have the debt discharged in bankruptcy, this could become problematic.  The creditors could then pursue you for the remainder of the debt.  For example, if your spouse was ordered to pay a joint credit card debt and seeks to discharge the debt in bankruptcy, the credit card company could then potentially come after you for that debt. 

Divorce decrees include specific language, called a “hold harmless clause,” that might allow you to ask the bankruptcy court for some relief in this situation.  It is essential to discuss this type of issue carefully with your divorce attorney.

Bankruptcy and divorce interact in complex ways, and you need an experienced attorney to help you through your bankruptcy divorce issues.  Contact us today at (253) 272-9459 to make an appointment and discuss your future.

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