Hafemeyer Law

Bankruptcy in Contemplation of Divorce

Dissolution can have a lasting impact on the finances of both parties. Much time is often spent working out the separation of assets and debts during the divorce. Couples may argue over which of them will keep the home, the cars and the debt. A very important consideration for the parties should be that the separation agreement does not rid them of their legal requirement to repay a joint debt.

Many married couples choose to put most assets into both individual’s names. Joint credit cards, mortgages and car loans are common. When the divorce is final, each party agrees to pay for different debts as equitably divided by the courts or an agreement. However, even though the marital termination agreement requires one party to pay a joint debt, the failure of that party to pay the creditor can begin collection proceedings against both parties.

For this reason, the parties in a divorce that have significant joint debt, especially unsecured debt, may be best served by filing bankruptcy before the divorce is final. The bankruptcy will likely discharge all of the joint debt and both parties will be relieved of the marital debt and concerns about the other not paying the creditor. A joint bankruptcy in contemplation of divorce may give each party a financial fresh start after the divorce is final.

Evaluating the chance of having the need to file bankruptcy after the divorce is a good idea early in the process because a joint bankruptcy must be filed while the parties are still legally married. An attorney that can assist the client in both the dissolution and a bankruptcy can be a great advocate in the midst of a difficult process.

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