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Bankruptcy and Divorce

Bankruptcy and Divorce

A divorce can be financially devastating and require a bankruptcy of one or both individuals. Often before the divorce the financial strength of a marriage is weak. Fighting over finances is the major reason for divorce.

If you are not divorced

it is much cheaper for a couple to file bankruptcy together than for each person to each file separately. It is important to discuss this with your attorney. If your marital financial settlement is within 6 months of your bankruptcy discharge, the Trustee can come after property received if it would not be exempt in a single filing. 

An example of this would be a home with $50,000 equity. The home would be exempt if both husband and wife are listed on the deed. If the home is given to the wife in the divorce, the equity is too high to be exempt for a single filer, so the house could be sold by the trustee to pay creditors. 

The divorce decree does not stop bill collectors

from collecting the debt from you, even if your spouse was ordered to pay it. In bankruptcy and divorce It is possible that your spouse will file bankruptcy and that you will have to pay the debt. Seriously consider whether you or your spouse will file bankruptcy and what guarantees your spouse will pay. For instance, if he or she cannot afford the house, it may be best for you to either force the sale of the house or to take the house (and the debt for it), rather than trust your spouse to pay for it. It is common for a spouse to file bankruptcy and sit in the house until foreclosure. The mortgage company will then attempt to collect from you. A situation like this could destroy your credit.