About four years ago, I could tell that things were turning south with my business. Cash flow was tight, and customers simply weren't coming back to shop some more. I realized that if I was going to keep my house, I would need to do something to resolve my finances. Although it was scary, I decided to meet with a bankruptcy attorney. After I explained my situation, he helped me to understand the process and how to tell if it was a good idea or not. When I decided to do it, things started changing for me right away. This blog breaks down bankruptcy in layman's terms, so that you can decide whether or not it is right for you.
Divorce is often tricky by itself, but it can also create ripple effects for years to come. One such effect is how it may alter future bankruptcies by either former spouse. How could your current or prior divorce affect your bankruptcy case? Here are a few of the challenges it may present.
1. Support Obligations Are Exempt
This is either good news or bad news for a divorcee, depending on which position they are in. If you receive court-ordered support, your ex cannot simply file bankruptcy to get out of paying it. However, payers cannot get bankruptcy relief from support debts.
2. It Can Help You Get Current
Some good news for both parties in any support obligation is that the common Chapters of bankruptcy can help a delinquent payer to get current. Chapter 7, or liquidation, bankruptcy frees them from other debts, and Chapter 13, or repayment plan, bankruptcy can help create a manageable payment plan.
3. Shared Debts Are Unevenly Discharged
Many couples share some debts when they divorce. Many of these can be discharged in bankruptcy, but the effect on both borrowers is confusing. The debt may be discharged after one spouse files for bankruptcy — but only for that spouse. The other may still owe the full amount. Similarly, discharge doesn't necessarily free one spouse from their obligation to pay back the other spouse.
4. Shared Assets May Be at Risk
Technically, only the assets — or portions of assets — owned by the person filing are included in bankruptcy. But if that person can't exempt an asset's value from liquidation, the asset may need to be sold in order to use the nonexempt value. This makes things challenging for the joint owner, who may need to take steps to protect it.
5. Income Changes Affect Qualifications
Did your income drastically change upon divorce? A high earner may have fewer expenses and obligations as a single person. More commonly, your household income may have dropped significantly. Either way, income affects which Chapters of bankruptcy you may file for. You may find yourself barred from Chapter 7, or you might now qualify for it with a lower income.
Where to Learn More
No matter what stage your bankruptcy is in, find out how it impacts future bankruptcy cases by meeting with a qualified bankruptcy attorney in your state today. With their help, you'll find the right path to get the relief you need to start over after your divorce.
Contact a bankruptcy attorney to learn more.
Share3 March 2023
