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Considering Bankruptcy? Know How it Can Affect Your Divorce Settlement

Posted on in Bankruptcy
Considering Bankruptcy? Know How it Can Affect Your Divorce Settlement

Bankruptcy and divorce can easily become intertwined. For some individuals, going through the divorce process is so costly that they need to file for bankruptcy afterward to get a handle on their debt. For others, debt and money problems during a marriage are what drives their spouses away, causing them to seek divorces. If you are currently going through a divorce and considering filing for bankruptcy, or you have previously been divorced and are unable to meet your debts, know how one of these issues can affect the other. Speak with an experienced bankruptcy attorney before making your decision.

Bankruptcy Does Not Eliminate Spousal Maintenance and Child Support Debts

This is perhaps the most important thing to keep in mind when simultaneously facing divorce and bankruptcy. Bankruptcy exists to make your debts more manageable, either through the liquidation and sale of your nonexempt assets or through a structured repayment plan. But because your former spouse and child rely on you for these support payments, spousal support and child support debts cannot be eliminated with bankruptcy.

Eliminating a Portion of a Marital Debt

When a couple divorces, each assumes a portion of their marital debt. When a divorced individual with a debt obligation files for bankruptcy, this debt can possibly be discharged through the bankruptcy if the court determines that it is not a support-related debt such as those discussed above. This can sometimes result in the other spouse being saddled with the full amount of the debt.

You Can File for Bankruptcy with Your Spouse

It is possible for you and your spouse to file for bankruptcy jointly before you are divorced. Whether this is the right choice for you depends on your relationship with your spouse at the time of the filing and whether it would be a conflict of interest for the same attorney to represent you both. The benefit to filing jointly is the amount of money you can save in court fees, which ultimately keeps more money in your pockets for your upcoming divorce expenses.

When you file jointly, all of your debts and your spouse's, even if they are separately-held debts, are attributed to you both. This means that all debts become jointly-held debts for the purpose of their discharge. This makes it a much more efficient process. But sometimes, filing jointly is not ideal. When one spouse has a considerable amount of singly-held property or priority debts, which include certain types of taxes and domestic support debt, it is often better for the spouses to file for bankruptcy separately.

Work with an Illinois Bankruptcy Attorney

If you are facing the prospect of filing for bankruptcy, be sure to work with an experienced Illinois bankruptcy attorney who can help you make the most productive choices for your case. At Newland & Newland, LLP, we are equipped to help you make it through the bankruptcy process as easily as possible. Contact our firm today to schedule your initial legal consultation with us.

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