Divorce and Bankruptcy

Many people going through divorce use credit cards to finance their living expenses.  This is how questions about what to do with the mounting debt come up.  People have different feelings about bankruptcy.  However, depending on your situation, filing for bankruptcy may be the solution you need.  The idea behind bankruptcy is giving someone a second chance.  Bankruptcy may even improve your credit rating.

Consumers can file for Chapter 7 or Chapter 13 bankruptcy.  Chapter 7 bankruptcy is “debt elimination.”  If you qualify for Chapter 7 bankruptcy, your non-exempt assets, if you have any, are sold to pay your unsecured creditors and your debts are discharged.  Chapter 13 bankruptcy is “debt restructuring.”  You propose a repayment plan that the court approves.  Your debts are discharged after you complete your plan.  Spousal support and child support cannot be discharged in bankruptcy.  Whether Chapter 7 or Chapter 13 bankruptcy is right for you depends on many factors.

There are good reasons to file for bankruptcy before divorce.  If you and your spouse can file together, it eliminates the need to file twice and to pay for 2 petitions.  Elimination of debt before you divorce means you have one less issue to negotiate.  Also, if you and your spouse eliminate your debts together, you will not be responsible for your spouse’s debts.  Even though your marital settlement agreement states that your spouse is responsible for his/her own debts, this provision will not protect you from creditors.  Your marital settlement agreement does not bind your creditors.  If you are struggling with the bills because you and your spouse separated or the bills piled up during the divorce, talk to a San Jose divorce lawyer who can point you in the right direction.

Written by Ekaterina Berman, a San Jose divorce and family immigration lawyer. My goal is to provide experienced and caring representation in family law matters to every client.