When I started looking into bankruptcy, I learned about how tricky it can be to file for bankruptcy when you have been divorced. Here's what I learned when I went through the process.
Divorce Law and Bankruptcy Law
The first issue I encountered was the realization that divorce law trumps bankruptcy law. Essentially this means that joint debt accounts that one party indicates that they will be responsible for in the divorce are problematic to include in the bankruptcy. The reason it is problematic to include them is because even if you declare bankruptcy and include those debts, you could still end up being liable for them. The reason for this is because if the bank that owns the debt goes after the other party to collect the debt after you declare bankruptcy, the other party can come after you to pay that debt. I made sure that the bankruptcy attorney I got knew how bankruptcy law worked when it came to divorce issues.
All debt is included in the bankruptcy, including joint debt. When you file for chapter 7 bankruptcy, you are getting rid of your responsibility for the joint debt but you are not getting rid of the other person's responsibility for that debt. So while you are off the hook to have to pay for that debt, the other person is not and will still be required to repay it unless they declare bankruptcy too. Again, this can be tricky when it comes to a divorce situation because unless you are both declaring bankruptcy or unless you make sure the account is in your name only before declaring bankruptcy, the other party can become responsible for debt that they did not agree to take. I had my bankruptcy attorney review my divorce paperwork to ensure that the joint debt accounts would not be an issue.
When you fill out your bankruptcy paperwork, you have to mark what debt is joint and who the other person is that you have joint debt with. I had to give my bankruptcy attorney my ex-husband's address so that he would receive a notification of my bankruptcy. If you have joint debt included in your bankruptcy, the other person will get a notification that you have declared bankruptcy. It will not indicate which debt you included that was joint, it will simply be a notification.
At the end of the day, these issues did not end up being too much of a problem for me because my ex-husband declared bankruptcy too. I just made sure that all of the debt that I knew could possibly be joint was included in the bankruptcy.
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- Debt Management
- Bankruptcy Law