Divorce and bankruptcy in Connecticut

When married couples are polled about the things they fight most about, money is consistently near the top of the list. In fact, according to a study conducted by Utah State University, frequent arguments about money have been linked to a higher risk of divorce. With money at the root of so many marital struggles, it may come as no surprise that divorce and bankruptcy are often closely related.

Joint vs. individual bankruptcy

One important issue when considering bankruptcy and divorce is whether to file for bankruptcy before or after the divorce. If both spouses wish to file for bankruptcy, some elect to file jointly while they are still married. This can have certain advantages in some situations, but it carries risks as well.

One of the potential benefits of filing jointly for bankruptcy, whether happily married or considering divorce, is that it requires couples to pay only one filing fee instead of two. Filing jointly may also cost less in terms of court fees and other legal costs. For couples already strapped for cash, this can be a compelling factor. However, because an attorney in a joint bankruptcy case represents both parties, the potential conflicts can present an obstacle to joint bankruptcy for couples who are planning to divorce.

Exempt property

Another factor to address when considering Chapter 7 bankruptcy during divorce is the potential impact that divorce may have on the couple’s exempt property – in other words, the property that is protected from seizure during the liquidation process.

In Connecticut, the law allows married couples to double the exemption amount for most types of property when filing for joint bankruptcy, with the exception of the homestead. Thus, depending on the individual circumstances, filing jointly for bankruptcy may be either beneficial or detrimental for spouses considering divorce in Connecticut.

Liability for marital debts

Married spouses are typically considered jointly liable for any debts they incur during their marriage, regardless of which spouse actually racked up the debt. Although divorcing couples divide their debts and assets during the divorce process, this does not necessarily affect each party’s liability to creditors. Therefore, if one spouse files individually for bankruptcy before the divorce is finalized, the other spouse may be left on the hook for the entire amount of the discharged debt. After the divorce and property settlement are finalized, however, those debts may no longer be eligible for discharge in bankruptcy if they are included in the court order.

Get legal help

When divorce and bankruptcy occur together, two complex processes become intertwined, and sorting them out is a complicated task involving many different factors. Anyone considering bankruptcy during divorce is advised to discuss their situation with a knowledgeable attorney who can advise them of their options and help them pursue the best course of action for their situation.