Divorce and Bankruptcy

divorce and bankruptcyNeither event is pleasant, but when a divorce and bankruptcy are occurring simultaneously, it can add tremendous stress on a couple. The divorce is, by nature, going to shift debt and couples are focusing not on their shared budget, but one of a single person. Because so many divorces occur due to financial problems, many question how many marriages could be saved were the financial burdens eased. It’s all too often, however, that this possibility comes after the couple has parted ways. So how can you juggle both events – or for that matter, possibly prevent a divorce?

The Divorce…

According to a 2009 study by Jeffrey Dew at the Utah State University, one of the best indicators of marital discord is what he terms “financial disagreements.” Couples who “disagree about finances once a week” are over 30 percent more likely to get divorced than couples that report “disagreeing about finances a few times a month.” Further, couples who disagree about money less than once per month run a 30 to 40 percent increase in the risk of divorce. This rate increases steeply when the partners fight several times per month, once a week, several times a week, to almost daily, when the risk increases to 125 percent to 160 percent. As Dew explained, “money disputes are the best harbinger of divorce.”

This raises the question: if money problems were not an issue, would any of these marriages have a fighting chance? The numbers suggest more marriages would stay intact. And if that’s the case, isn’t it worth it to consider bankruptcy before you call your divorce lawyer?

…And the Bankruptcy

Remember, though, bankruptcy protection can’t help if you’re already divorced and paying spousal support or child support. Those are debts that are not dischargeable in a bankruptcy case. If you are divorced, bankruptcy can help wipe the slate clean of your other financial obligations, therefore making it easier to maintain your support payments. Credit card debt and medical debt are the two biggest culprits. If you’re behind on support payments, discharging debt and getting into a less expensive vehicle can help you catch up on your child support payments.

Also, many times I am asked the question, should I file the bankruptcy first and then get divorced or the divorce first and then file bankruptcy?  Although each fact situation is different, I almost always conclude that you should file for bankruptcy first and then consider divorce.  Why?  In a divorce, you are dealing with three things….debts, assets and children.  If you wipe out the debt in a Chapter 7 bankruptcy before the divorce, you then are only dealing with two things – assets and children.  And who knows, maybe after all the debt is wiped out you will no longer want the divorce.  The “thing” that was causing the marital discord is gone!

Also, any financial obligation created in your divorce decree is considered a “Domestic Support Obligation” and is not dischargeable in your subsequent bankruptcy case.  Therefore, filing the bankruptcy first, getting rid of that debt, and then looking at divorce is usually always the best option.

These are two tough dilemmas to go through, but coming through the other side means a new start. If you’d like to learn more about how bankruptcy laws in Texas can help provide a new start, we’re more than happy to explore your options with you. You probably have more avenues than you realize. Both of these events mean fresh financial starts and you might be surprised at how much pressure the absence of overwhelming financial debt can lift from a marriage.

Give us a call today to learn more. With two offices – in Killeen and Waco – my staff and I are happy to accommodate your schedule. We offer a free one hour consultation and convenient payment plans.  Call today to start yourself on the road to a fresh financial start!

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