There is a well-known adage that the thing husbands and wives fight about most is money. Financial tension can put serious strain on a marriage and can often lead to divorce. It should therefore come as no surprise that when many marriages fail, the spouses wind up with financial difficulties, as well.
Couples should consider a number of issues when they want to get divorced, but are stuck with unmanageable debt and financial difficulties. Here are the two most commonly asked questions.
Which should come first: divorce or bankruptcy?
A divorce settlement agreement will ultimately end up dividing the assets as well as the debts of the parties. The wife may have to pay one credit card and the husband another credit card along with certain other debts. As long as each side holds up its end of the bargain and continues to take care of the debts, this will work fine.
However, the divorce settlement is an agreement between the parties, and does not bind the creditors. So, for example, if the husband defaults on his payments for his card, or gets a discharge of that debt in bankruptcy, his ex-wife may find herself footing the bill. It will be small consolation to her that she can go back to divorce court and fight, at her cost, against her ex-husband’s breach of the agreement.
The parties might want to consider filing for bankruptcy jointly before their divorce. The advantage to this is that they can jointly discharge marital debt, and reduce for each the chance that the other will drop the responsibility back into his or her lap after the divorce. However, each case is different and the specifics of each family should be weighed with care.
What about domestic obligations?
A divorcing couple should be aware that domestic obligations like child support and alimony are not dischargeable in bankruptcy, and should make their divorce and bankruptcy decisions with this fact in mind.
If you have any questions about how your bankruptcy and divorce will affect each other, contact us, and we will be happy to assist you.