Know How To Divorce While In Bankruptcy

Many of the divorce cases are due to money problems in one way or another. So it’s normal that bankruptcy can be the part of the picture. As divorce is a tiring process and when you plan to terminate your marriage while in bankruptcy, you need to take care of lot of things. It is a fact that bankruptcy and divorce make the legal matters more complicated.

For people who are facing serious financial issues while still married, and planning for divorce can result to a foreseeable bankruptcy. At this time, couples often become confuse as “Whether they should file for bankruptcy first, or wait until the divorce is filed or concluded?” Well, the answer to this complicated question depends on many factors such as where you live and what issues need to be resolved. However, experts suggest that if the chances of bankruptcy are high and there is more debt than assets to divide between the couples, it is advisable to file for bankruptcy prior to starting the divorce process.

In the US, Bankruptcy law can be complicated and hence you need to have the basic knowledge about the laws. This will help you to understand the difference between the types of bankruptcy and to realize which one will be suitable in your case. In the US, there are two types of bankruptcy laws – Chapter 13 and Chapter 7. Apart from these two popular bankruptcy laws, there are also less common Chapter 11 and Chapter 12 laws too.

Chapter 7

The Chapter 7 is also known as liquidation bankruptcy. In simple terms, Chapter 7 allows you to liquidate all of your assets. Most of your unsecured debts, such as credit cards, personal loans, repossessions, medical bills, and so on will be taken care of by Chapter 7 Bankruptcy laws and use the proceeds to pay off your debts, erasing the debts that cannot be paid in full. There are some debts that a Chapter 7 cannot wipe out. These debts include student loans, taxes, alimony, child support, and damages related to criminal restitution such as damages from drunk driving.

After you have filed for Chapter 7 in the court, your creditors will no longer be allowed to call or harass you regarding your debt. Most people who file Chapter 7 are able to keep their homes and cars as long as they are current on their payments. However, not everyone can file a Chapter 7 as there are income limitations on who may be able to do so.

Chapter 13

The Chapter 13 is another legal way to handle your debts. Here a plan is made to pay back a portion or all of the debts that you owe. In Chapter 13, you are usually able to keep your house and/or car. Most couples prefer to file a Chapter 13 as it allows them to catch up on their house or car payments and stop a foreclosure or repossession. In a Chapter 13, secured debts include many things such as what you are behind on payment such as your house, your mortgage payment(s) and what is owed like your car, and a portion of your unsecured debts like credit cards and medical bills will be repaid over a 3 to 5 years time period. Chapter 13 law will not wipe out certain debts such as student loans, most taxes, alimony, and child support. A  withholding calculator can help with any necessary payments by adjusting your allowances and exemptions at your job. The Chapter 13 plan will include the amount you are behind on your home, your monthly house payments to your mortgage company, your auto loans, taxes and a percentage of unsecured debts including credit cards, personal loans, medical bills, old repossessions and old foreclosures. A monthly payment will be determined, and you will make this payment each month to the Bankruptcy Trustee, who will then distribute the money to your creditors based on federal law.


A couple can generally file a Chapter 13 if either they are behind on their house or car payments and want to keep their house or car; or they do not qualify for a Chapter 7 .

Other Types of Bankruptcy Laws

Apart from Chapter 7 and Chapter 13 bankruptcy laws, there are also two less common types of laws – Chapter 11 and Chapter 12. Well, Chapter 11 is usually for corporations and Chapter 12 is generally for family farmers or family fishermen. There are limitations on both of these laws based on federal and state laws. So, before taking any step, talk to a competent bankruptcy lawyer and be completely honest about the domestic situation before filing.

File Bankruptcy Jointly:

When a couple files for joint bankruptcy, it lowers the costs as compared to when they file for bankruptcy separately after the divorce. When a couple files bankruptcy jointly, all community property goes to the bankruptcy estate during divorce which is mainly used to pay the debts. As soon as you file bankruptcy, the court grants an automatic stay which prevents creditors from automatically collecting on all debts. It is the court that decides upon which properties/assets are exempt from being liquidated to pay the debts owed. Later on the remaining properties are divided between the couple. In short, by filing a joint bankruptcy, the couple can work through debts and will be able to have it all settled before the divorce. It is important to bear in mind that even after filing bankruptcy; one can ask the court to impose alimony or child support to the other person.

Hire Different Lawyers:

The process of divorce and bankruptcy are quite complex and too technical for a normal person to understand. Even though both processes are part of “Family Law” or “General Practice”, they require a special type of expertise. Hence it is advisable not to use the same lawyer for both the cases. Even tough, hiring two different lawyers can be expensive for you, yet you need to choose lawyers who specialize in each of these fields individually to ensure that you get the best output. The processes of divorce and bankruptcy are completely different from each other and so it is obvious that a single lawyer cannot possibly have the necessary expertise to effectively handle both processes. Also when you hire two different lawyers, both of them has more time to devote in the area of their expertise. So, always consider retaining the services of a divorce and bankruptcy lawyer so that the bankruptcy proceeding in your divorce case can be handled in a professional and expert way.

To conclude if your marriage is breaking up and there are plenty of financial issues to take care of, it might be nice to clean up your debts too and get a true fresh start.

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