Understanding Bankruptcy After Divorce

Life after a divorce is full of adjustments for everyone involved. The dissolution of a marriage is never easy and when you add new financial strains into the mix, it can be difficult for both sides to recover quickly. Adjusting to life on a single salary can be hard for both parties after a divorce and in many cases, this can lead to one or both former spouses filing for bankruptcy.

If you have found that the bills just seem to keep piling up after your divorce —you are not alone. For many recently divorced people in the US, bankruptcy can provide some much-needed relief from debts by wiping our credit card balances, personal loans and medical bills. But there are other situations that you should consider before you file for bankruptcy after a divorce.

Understanding Bankruptcy and Divorce

If you are considering filing for bankruptcy after a divorce there are a few key factors you should keep in mind. Aside from working closely with an experienced bankruptcy attorney, you will also need to take into consideration any debts that are not included in the filing process, potential property settlements and more.

Spouses Can Use Bankruptcy in Different Ways

Some couples may choose to file for bankruptcy before a divorce to simplify all of their debts before they dive into another intense legal process. Most experts in the field will recommend that if it is possible, couples should go ahead and file for bankruptcy before they divorce so that you both know how the debts will be handled.

While the hope is that every divorce can end with an amicable split, sometimes that is not the case. In fact, sometimes former spouses will file for bankruptcy after a divorce in an offensive move. This can cause an issue when creditors come after both sides to satisfy any debts that were jointly incurred. That means that any joint debts that you shared will now become your responsibility if your former spouse files for bankruptcy after your divorce. This process can have a ripple effect, causing both parties to eventually file for bankruptcy due to the inability to pay off their debts.

Bankruptcy Includes Everything

When you file for bankruptcy, the estate includes everything you own and owe at the time of filing. When you or your former spouse file, this means that all of the property that you acquired during the marriage may potentially be used to pay off debts. Additionally, after bankruptcy is filed the court will put a stop to debt collectors harassing you over unpaid debts but you will still be held responsible for any child support or alimony that you may owe.

What About Property Settlements?

Typically, property settlements are not considered dischargeable in a bankruptcy case. However, certain exempt properties are protected and cannot be made available for sale to pay off any old debts. Exemptions in bankruptcy filings can vary by state, so be sure to do your research before you file. For example, in the state of Illinois, each spouse may claim up to $15,000 of home equity as exempt from debt collectors.

Protect Your Finances After a Divorce

Figuring out how to manage your finances as a single person is something that will take time. If your spouse was the primary earner, you will need to find a job, learn to manage your finances and live on a budget. For many newly divorced people, this difficult life change can lead to an overwhelming amount of debt and bankruptcy can be a good option for restarting.

However, if you are considering filing for bankruptcy and divorce at the same time, it may be in your favor (and your ex’s best interest as well) to take care of your finances before continuing with divorce proceedings.

If you are considering filing for bankruptcy after a divorce, it is important that you speak with an experienced and knowledgeable bankruptcy attorney to guide you through the process. With a strong team of attorneys by your side, you can navigate the legal process more efficiently and start over with a new beginning. For more information on bankruptcy after divorce, visit the team at Yardley Law online today and schedule an initial consultation.

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