When people are young and in love, they may never contemplate they will get a divorce or face overwhelming debt from which they cannot escape. Sadly, for those in Michigan and elsewhere, the reality is that many couples experience financial hardship that leads to disputes. As they spiral deeper into debt, their differences become irreversible, and divorce seems to be the only solution. However, it will not resolve the financial problems, many of which may be marital debts for which both spouses will be responsible. This is where the bankruptcy law can bring relief.
Under these circumstances, bankruptcy can be a financial survival tool. The question will be whether to file for bankruptcy before or after the divorce. Some advisors suggest it benefits both parties if it is filed before the divorce. One reason is the fact that, regardless of the agreements reached by the two spouses about who will pay which debts, their creditors will continue to keep them both liable for joint debts. If both spouses can cooperate, and there is no threat of one party hiding assets, filing for bankruptcy can save money and ease the divorce process considerably.
While it could make the property division process easier, filing for bankruptcy will protect the couple from creditor harassment at this difficult time. However, regardless of the bankruptcy chapter for which they file, certain debts will not be discharged. These include alimony, child support, student loans, criminal restitution or property settlement demands. Bankruptcy is not an easy process, but it may provide both spouses a chance to have a fresh start as debt free single people — if they file before the divorce.
There are many things to consider when discussing divorce and bankruptcy, and there will likely be several questions requiring answers. The best place to seek those answers might be the office of a Michigan attorney who is experienced in both divorce and bankruptcy law. A lawyer can explain the different bankruptcy options along with the pros and cons of each and how it will impact the division of property and other divorce issues.
Source: divorce.lovetoknow.com, “Bankruptcy before Divorce“, Charles Cooper, July 29, 2017
