Divorce creates liabilities. From child support to spousal support to an obligation to indemnify your Ex against credit card bills, there are virtually no divorces that do not create liabilities. How these are treated when one of the ex-spouses files for Bankruptcy is entirely dependent on Federal Law.
The Bankruptcy Code makes child support orders and spousal support orders non-dischargeable. That means that they do not go away in a Bankruptcy case. However, the Code does allow discharge of property and debt division provisions under some chapters of the Code. The trick is knowing what will or will not be discharged if your Ex decides to file for Bankruptcy before you make a deal to settle your divorce. The wrong language or a bad decision could leave you holding the bag with no way out.
Of course, if you have debt to divide in a divorce and you can qualify for Chapter 7 liquidation, it usually makes most sense to file Bankruptcy as a couple first, and then get divorced. Unfortunately, this requires a level of coordination of cooperation that simply may not exist in a divorce. Knowing the eventual treatment of your obligations in Bankruptcy can be a key factor in deciding what to do about your divorce.
This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.