Tag Archives: Divorce and bankruptcy

Filing for Bankruptcy After Divorce?

Whether to File Bankruptcy After Divorce: Consider These Scenarios

Divorce is difficult enough without also worrying about finances after the divorce and whether filing for bankruptcy after divorce makes sense and will help you out. In some situations, the spouse ordered to pay the other doesn’t hold up their end of the bargain in the settlement or divorce decree. You can go back to court and try to order the deadbeat spouse to pay what they were ordered but that doesn’t stop the creditors who want their money. When you cannot pay them, you may wonder if a Chapter 7 or Chapter 13 bankruptcy will save you.

The creditor knows one thing, it wants to be paid. The creditor could care less whether you have a court order that says your spouse is ordered to pay the credit card, when you are liable for the debt and it remains unpaid you risk damage to your credit, collection efforts, lawsuits and wage garnishments.

Few people will criticize you for filing bankruptcy after a messy divorce where you and the former love of your life are left to fight over debt. In some cases, the former spouse just wants to punish you by not coughing up the money they owe you to pay off debts.

Read our blog article: 7 Bankruptcy Repercussions Are Myths Not to Worry About.

A Personal Bankruptcy Only Affects Your Credit, Not Your Spouse

Bankruptcy laws are there to protect you when you cannot afford to pay debts. Chapter 7 is the typical full discharge we think of and Chapter 13 is a reorganization bankruptcy where you repay a portion of your debts over a three to five-year period. While you and your spouse may be jointly liable on a debt, you both have independent personal credit ratings and those scores are totally separate.

When you are looking for bankruptcy answers and call Joseph Wrobel’s Chicago Bankruptcy Firm, he will find out whether you and your former spouse are both liable on certain debts. Mr. Wrobel can tell you what happens when one spouse files bankruptcy and the other has not and is still liable for the debt.

Is the debt discharged if two people are listed? Or, simply, is the obligation for one party to pay the debt discharged and the other is on the hook? What happens if the debtor comes after the other party to pay the debt when it was ordered to be paid by the other by the divorce court? Call Joseph Wrobel, Ltd. in Chicago if this is your problem. (312) 781-0996.

Read another article: Don’t Believe the Hype: Get the Real Truth About Bankruptcy, Ignore the Rumors.

You and Your Former Spouse Accumulated Debt During Marriage

When you were married, you and your spouse worked hard and spent money keeping up with your friends and neighbors. As you approached your divorce your divorce lawyer asked you to complete paperwork listing all your assets and debts. Shocked, you realize how much your debts outweighed assets. Yes, your marital home was beautiful, but everything was financed.

Most couples approaching divorce are dividing debt at the end of the marriage. Houses are mortgaged with second mortgages and lines of credit. Credit cards are carrying transferred balances from other high interest cards. Vehicles are financed or leased. In many divorces, the only assets available are vested funds in retirement accounts.

The High-Income Earner Paying for Two Residences and Child Support

Divorce is very expensive, especially for the spouse making more money. The higher income earner may be ordered to pay alimony. When there are minor children, there is also an obligation to pay child support. Even a professional earning significant income feels the immediate reduction in their income needed to pay bills and live from day to day.

Many people simply run out of monthly income when paying alimony, child support and other debts ordered to be paid by the court. Is it a surprise some people simply stop paying? No.

You Are the Higher Wage Earner and Want to File Bankruptcy After Divorce

With a few options on the table you owe lots of money and have some decisions to make. In most cases any child support obligation will be automatically withheld from your paycheck. With what is left you simply cannot make it. Maybe you want to file bankruptcy to eliminate the credit card debt you were ordered to pay. Maybe you realize you can no longer afford the mortgage on the expensive house or financed luxury vehicle. It is time to downsize.

Before you take advantage of the bankruptcy laws consider your obligations to your former spouse and children and ask Joseph Wrobel about your obligations in the family court. He can talk to your divorce lawyer and help you make the best financial decision that gives you a break without hurting your former spouse and your children.

You Are the Dependent Lower or No Wage Earner and Need to File Bankruptcy After Divorce

If your former spouse and co-parent identified in the paragraph above did not heed our advice not to hurt you or the children by leaving you high and dry, you can get the help you need with the bankruptcy laws. Depending on your settlement agreement and divorce decree you might need to consider whether to include certain debts to be discharged in your bankruptcy. Like your former spouse would, you too should ask Joseph Wrobel to help figure out what to do with post-decree divorce financial obligations.

When you do file for a Chapter 7 or Chapter 13 bankruptcy, your phone should stop ringing as debt collectors are prevented from collecting or contacting you during bankruptcy. The “Automatic Stay” provision also stops a Wage Garnishment. Helping you keep money in your pocket during the bankruptcy is what we do for you at Joseph Wrobel, Ltd.

Have you seen this one from a few years back? Credit Scores, Cards and Reports: What You Might Not Know.

Your Spouse Files Bankruptcy After Divorce, How Does Joint Debt Impact You?

Joint debt means joint responsibility. If you and your former spouse are both named on a financial account, then you both are jointly responsible, regardless of what it says in the divorce decree. If your ex-spouse is ordered to pay and they stop paying, the obligation becomes yours, 100 percent.

With so much uncertainty about Filing for Bankruptcy After Divorce, talking to both your divorce lawyer and a bankruptcy lawyer such as Joseph Wrobel is necessary, so you don’t worsen your financial position and future if things do not go as planned after the divorce.

Call Joseph Wrobel, Ltd. in Chicago today at (312) 781-0996 and learn your rights and options under the law if you are considering filing for bankruptcy after divorce.

 

 

 

 

February 2016 Chicago Bankruptcy Question and Answer Podcast with Joseph Wrobel

Chicago bankruptcy and consumer credit attorney Joseph Wrobel shares news and updates in bankruptcy law as well as business and consumer financial matters. It has been documented that financial troubles can cause all sorts of ailments, the most common of which is sleeplessness. Joseph Wrobel helps clients alleviate their anxiety created by the inability to pay bills and the embarrassment of financial distress.

CLICK/TAP HERE TO LISTEN ANYTIME

Sample questions answered in this 30-minute show:

  • What is the minimum amount of debt required to file for bankruptcy?
  • Will my fiancée’s student loan debt become my debt once we are married?
  • Can my spouse be sued for debts, or her assets seized I owe if I file for bankruptcy alone?
  • Can a chapter 13 bankruptcy help me reduce my monthly student loan payments?

 

Joseph Wrobel has been a practicing attorney since 1973 and has experience in a wide variety of law relating to legal matters for individuals and families. Wrobel helps clients get out of debt and get a fresh start. He is an active member in several bar associations and the Bankruptcy Panel of Pro Bono Program of the Chicago Volunteer Legal Services. After serving the U.S. Army Reserve 363rd Civil Affairs Unit, Wrobel earned a B.A. in Psychology from Northwestern University and in 1973, he earned a JD from DePaul University Law School.

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Visit our Chicago Bankruptcy website online for more about the firm or call for more information at (312) 781-0996 or e-mail at JosephWrobel@ChicagoBankruptcy.com.

Divorce and Bankruptcy: Considerations for divorcing families with bankruptcy questions

Debts owed to creditors are collectable despite a divorce. Even if there is an agreement for the parties to divorce to split some or all the debts, the creditor’s legal right to collect on a debt remains despite a family court order dividing responsibility for debts. A collector can proceed on debt collection. Collectors may file lawsuits to lien and foreclose on properties as well as attempt to seize other assets and garnish wages. A bankruptcy can stop that collection activity but a divorce proceeding cannot stop the collector.

The automatic stay provision of the Bankruptcy Code can stop all collectors from pursuing collection of a debt during an active Chapter 7 or Chapter 13 bankruptcy. For more about stopping creditors, please read our article, Examples of the automatic stay and how it operates in bankruptcy law.

A divorce and family law court will distribute marital assets and debts, some of which are dischargeable.

In a divorce case, the family law court reviews all the assets and liabilities shared in a marriage. Using the family code property division laws, a share of assets and debts are awarded to each spouse. After a divorce, a spouse may have significant assets, but too often, there are spouses who leave divorce owing debt. In some cases, the spouse ordered to pay debts does not and leaves the other spouse on the hook for the debt and still exposed to the collectors, despite the family court’s orders. It is important to note that some of the assets kept or divided in divorce include 401K accounts, which are excluded from a bankruptcy case. Therefore, it is never wise to invade the 401K to pay divorce debts.

Financial liabilities such as mortgages, car loans, credit card debt, bank loans and money court judgments can be eliminated through a Chapter 7 (full discharge) or a Chapter 13 (partial discharge and repayment) bankruptcy case.

Spousal alimony, maintenance and child support cannot be discharged in bankruptcy, in most cases.

After a divorce court distributes assets and debts, child support and spousal alimony, called maintenance by the courts, is awarded in a fixed amount and duration in most cases, and you cannot eliminate the financial obligation through bankruptcy. As a general rule alimony, maintenance, and/or support are not dischargeable divorce and separation agreements. There are exceptions however, where alimony, maintenance or support payments can be discharged:

(A) the debtor does not have the ability to pay such debt from income or property of the debtor not reasonably necessary to be expended for the maintenance or support of the debtor or a dependent of the debtor and, if the debtor is engaged in a business, for the payment of expenditures necessary for the continuation, preservation, and operation of such business; or

(B) discharging such debt would result in a benefit to the debtor that outweighs the detrimental consequences to a spouse, former spouse, or child of the debtor.[i]

For best results, an experienced bankruptcy attorney can advise as to all your best options.

There may be further and more detailed questions about when to file a bankruptcy, before or after the divorce, and there may be other legal issues and outcomes that should be considered. An experienced bankruptcy attorney has worked with many clients with divorce actions before or after a bankruptcy. Joseph Wrobel and the associate attorneys at Joseph Wrobel, Ltd., can help get the conversation going with a free review and assessment of your options.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can “Like” the firm’s Facebook page and “Follow” Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.

[i] 11 U.S.C. Section 523(a)(15)