Bankruptcy and Divorce

Dealing with a divorce is an emotional time for a family. Everyone involved deals with tough issues related to the end of a marriage. When a bankruptcy further complicates the situation, it can be overwhelming. Even if there were no financial troubles during the marriage, both parties can find themselves in debt after the divorce. All debts and assets need to be addressed and a plan should be made to manage them through the process of the divorce.

Divorce often involves many complicated matters such as dividing assets, parenting plans, and child support and alimony payments. Deciding who keeps the house, the cars, and even the furniture can be emotionally exhausting. If children are involved, it is necessary to decide where they will live and to work out visitation arrangements with the other parent. Child support and alimony payments can seriously affect your ability to pay bills. Many will also face foreclosure of the marital home in the time surrounding a divorce.



The Impact on Your Financial Future

There are a variety of ways in which the outcome of a divorce could have a detrimental impact on a person’s financial future. For instance, any existing debt on joint accounts could remain an issue regardless of who agrees to take responsibility for the balance. The terms of a divorce decree may do little to dissuade creditors from seeking payment from all liable parties should payments fall behind and delinquent accounts could also have a negative impact on the credit scores of both parties.

When facing a similar scenario, experts indicate that taking steps to close out joint credit accounts and separate joint banking accounts could prove crucial. In addition, keeping watch over any existing debts to ensure payments remain up to date may also be vital to preventing a potential disaster. Should the situation leave one feeling trapped under the weight of debt, seek advice on the available options to pursue relief may become necessary.

Understanding Debt Relief Options

It is helpful if both parties in the divorce can work together and come to a compromise as to how things will be divided. This includes sharing the debt as well as any assets. Even though an agreement is made, one or both parties still may not be able to pay the debt they have agreed to take on after the divorce. Working together on these issues is not always possible, but the outcome is frequently more beneficial for both parties in the end.

Debt relief options are available to help ease some of the financial pressure. Chapter 13 and Chapter 7 bankruptcy are both alternatives that should be considered if you owe child support and also have unsecured debt. Though child support and alimony payments cannot be discharged through bankruptcy, many other bills can be included to reduce the financial pressure. Medical bills and credit card debt may be cleared to give you the fresh start you need to provide for your children. Problems may arise by paying debts that you took on in the divorce proceedings. These debts carry special consideration when including them in bankruptcy.

Filing Before or After a Divorce

Deciding to file for bankruptcy before or after a divorce depends on your situation and preference. Couples or an individual party in a divorce may find that it’s best to file for bankruptcy while going through a divorce. This will allow the parties to have a clearer picture of what debts will be discharged in bankruptcy. Other couples may find that it’s best to finalize the divorce and then file for bankruptcy. This may allow couples to more quickly proceed through the divorce while each party is responsible for their own debts presented in the divorce judgment. 

Also, consider time may be of the essence in your situation. Divorces and bankruptcies alike are processes that may take considerable time. It’s important to figure out what your priority is. Are debt collectors after you? Are you out of work? Are you in a toxic marital situation? These scenarios should factor in your decision as well.

Alimonty Obligations

If bankruptcy matters arise after a divorce, you will likely have questions about obligations and what you can and cannot discharge in bankruptcy. It is important to understand the differences between dischargeable and non-dischargeable debts or obligations. In Ohio, domestic obligation debts such as alimony (maintenance) and cannot be discharged in bankruptcy.

Our alimony and bankruptcy attorneys know the law and will be working on your team to help you get debt relief. We have significant experience representing men and women in Chapter 7 and Chapter 13 bankruptcy matters involving divorce and have a core group of lawyers with specific experience in this area.

Child Support Obligations

For many parents who owe child support payments, bankruptcy may provide a fresh financial start, allowing them to manage finances and better provide for their children. Eliminating credit card debt, medical bills and other unsecured obligations often allows parents to better provide for their children. Moreover, a Chapter 13 plan may help you to catch up on pre-bankruptcy child support arrearages.

In both Chapter 7 and Chapter 13 bankruptcy for individuals, child support obligations (and back pay of child support) cannot be discharged. Child support will have to be fulfilled even after personal bankruptcy is filed. At our firm, we have lawyers who specifically focus on bankruptcy issues that arise in bankruptcy and divorce, and can provide highly knowledgeable legal advice about your situation.

Read our Ohio bankruptcy exemptions page for more information on what types of assets are protected in a personal bankruptcy.

Our qualified bankruptcy attorneys can help maneuver through the legal aspects and get you on the path to a solid future after your divorce. For a FREE, no-obligation consultation to learn more about your financial obligations when it comes to bankruptcy and divorce, call 513-723-1600.

We are a law firm and a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.