Bankruptcy and Divorce: Which Should Come First?
Consumer bankruptcy under Chapter 7 and Chapter 13 is available to individuals
and married couples who are seeking effective, long-term debt relief.
Couples who are contemplating dissolution or have recently divorced should
understand special aspects of the bankruptcy process that are relevant
to their situation.
Financial hardship is the primary reason for bankruptcy applications. It
is also a common source of marital strife. In many cases, the marital
estate may consist largely of debt, and division of these obligations
is a key part of the divorce process. But, according to
Chicago bankruptcy lawyers, the sequence in which divorce and bankruptcy occur has important implications
for each spouse.
Bankruptcy Before Divorce
For couples who have the foresight to realize that bankruptcy can deliver
the debt relief they need now or will soon require, completing that process
before negotiating a divorce agreement is a very good idea. The primary
reason: creditors are not bound by the divorce decree, which is a civil
matter between two individuals.
In other words, one spouse's pledge to pay off a credit card balance
is irrelevant if that spouse later discharges debt through
Chapter 7 bankruptcy after divorce. If the other ex-spouse was once a joint account holder,
he or she can be required to pay the balance.
Bankruptcy Provides Solutions Before or After Divorce
The issues that lead to bankruptcy may not arise until after divorce, such
as job loss or a serious illness to one ex-spouse. The non-filing ex-spouse
may also benefit from legal strategies regarding asset protection, foreclosure
and other issues.
Regardless of your divorce and bankruptcy needs, discussing all of your
circumstances with a Chicago bankruptcy lawyer can lead to a better plan
for financial independence in every sense of the phrase.