Financial stress is often cited as a primary contributing factor to marital stress and dissolution. As the current global recession continues to take a toll on families and individuals, couples seeking a divorce with either or both persons in deep financial debt must strongly consider how bankruptcy will affect the divorce.
Filing for bankruptcy can give an individual a fresh financial start and relieve the individual from creditors collecting debts. The ending of all efforts to collect any debts by collectors is known as an automatic stay. However, before former president Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005 bankruptcy was often used as a tool to permanently evade, or discharge, family obligations set by agreements or court orders after a divorce. At present, any domestic support obligations are now a first priority claim and are ineligible for discharge including child support and alimony payments.
In most cases an individual or couple will be advised by an attorney to file for bankruptcy before starting legal divorce proceedings. Filing bankruptcy before divorce proceedings simplifies the clearing out of debt, the negotiating of how remaining debt should be divided, and provides protection from an independent bankruptcy filing by you partner saving you from the future responsibility of having to pay your former partner’s debt. Filing a joint bankruptcy claim is also more cost effective than filing two separate claims. To further prevent a creditor from collecting debt from you instead of your former spouse, a wise precaution would be to have a “hold harmless” or “indemnity” clause stated in the divorce decree that will require your former spouse to pay certain debts or repay you if a creditor makes you pay debt.
If you are dealing with a divorce or family law situation, we strongly advise you to speak with one of our Atlanta family law attorneys about structuring a settlement that works for you and your family. We look forward to working with you.
Tags: bankruptcy and divorce, divorce ga, divorce recession, financial stress divorce
I too think Filing for bankruptcy before divorce is very essential.Who wants to end up with an huge debt after divorce. Couples should be very careful to deeply talk to their lawyer about this and work a way out to share the debts before divorce,Otherwise at the end the load of the debts might be much more than the divorce.And i strongly agree with you about the fact that once bankruptcy is cleared before a divorce,one can have a fresh financial start.
Because so many people going through divorce are under financial stress, they often think about the possibility of bankruptcy as a way to get control of everything. If you’re thinking about bankruptcy, or more importantly, if your spouse is thinking about it, you’re smart to pay attention to this information, because the way you word your divorce settlement can have a lot to do with how the bankruptcy affects your divorce, and vice versa
The prospect of having bill collectors coming after you for the debts your ex was supposed to pay can be unsettling. If you are concerned that your ex will file for bankruptcy, you should bring this up with you attorney so you can discuss ways to protect yourself. Bankruptcy is not a way to avoid court ordered alimony or child support payments
Thanks for this great post! You just gave me enough highlight on bankruptcy and divorce. Never thought declaring bankruptcy before divorce could be really effective.