Bankruptcy or insolvency is legal state that a person or an organisation cannot pay to its creditors.
Many people think filing bankruptcy before divorce is the key. While in the happy times when you vowed to get married, divorce was a situation which you prayed should never come in sight. But one never knows when evil knocks the door. Now since you are taking the not-so-thought-of-step you must also consider filing bankruptcy before divorce. There was a time when both were unthinkable but now divorce is common and bankruptcy is more of a tool.
What usually happens in a divorce is applicable to you and your spouse, but not to your creditors. You have your debts, your ex has their debts, but even after the divorce you will be liable to both. While you may think that divorce is the easy way out of debts incurred by your spouse, if the loans were taken jointly then you are just as much responsible for the debts as your partner. While you can dissolve the marriage, you will not be able to get rid of the debts. So filing bankruptcy before divorce will not make you get rid of your share of money owed to creditors.
That’s right, in most of the cases your creditors will be working with you, there are something you must remember.
- Debts incurred during the course of the marriage are the responsibility of both the parties.
- If your ex fails to pay the debts, you will be stuck with them
- If your ex files bankruptcy and you do not, you will be stuck with all the debts.
One answer to these potential problems is to file bankruptcy before divorce, this will firstly save your money and secondly make your divorce straight forward. However cooperation from both the parties is required in such a case. If you think your ex is hiding assets or not cooperating then you must hire a good attorney to make the proceedings simpler.
Advantages of filing bankruptcy before divorce
Firstly you must plan how your debts will be handled before divorce. This will make it easier for you to divide your marital property. And luckily thanks to the automatically connected stay it will shun away all the letters and calls from your creditors.
Things that filing a bankruptcy won’t do:
- Shelter you from alimony
- Stop you from having to pay for child support
- Eliminate student loans
- Stop you from paying criminal restitution
- Affect the demands of your property settlement
There are two types of bankruptcies:
Chapter 7:
This is also called “straight bankruptcy”. It eliminates all the debt other than the ones mentioned above. In this all the property is liquefied to clear the debts. This kind of bankruptcy is available to individuals as long as the court feels the individual is not trying to abuse the system and it stays in the credit report of the debtor for next 10 yrs.
Chapter 13:
This kind of bankruptcy is available on the basis of some rules regarding income stability and amount of debt. In this the debtor is allowed to pay smaller amounts for a longer period and is also allowed to keep some of his property for help facilitate income therefore payback. This kind of bankruptcy stays in the debtor’s credit report of seven years.
Bankruptcy is no picnic; it is just a tool to be used under worst circumstances to make the next few months bearable after the divorce and is also given on the basis of discretion. However, working closely with your ex to pay off the debts timely and save some of the property and assets is a good idea. Take guidance from a good attorney, who will make the entire process of filing bankruptcy before divorce easier for you to understand and handle.
