Filing for bankruptcy relief during divorce? What you need to know

The need for a fresh financial start can happen at any time, but those who are considering filing for bankruptcy while completing a divorce should be aware of a few nuances.

• Timing matters. File for bankruptcy first, if possible. In most cases it is ideal to complete a bankruptcy petition prior to moving forward with a divorce. This may allow both individuals to free themselves from liability for certain debts. If the petition is filed after divorce, any sort of discharge that is granted only applies to the individual who filed for relief.
• Divorce does not separate you from creditors. Once a divorce petition is completed you are no longer legally attached to your ex-spouse. Unfortunately, this is not true of creditors. If you bought a home, car or took out credit cards together you are likely liable for the debt. Not just a portion of the debt, all of the debt. Although a divorce agreement may split the debt, creditors are not required to honor this agreement. As a result, they can go after either individual for full payment. This is true even if you signed the deed for a home over to an ex. Although the home may now belong to the ex, this act does not extend to cover the obligations associated with the home loan. The only way to remove your name from a loan is to either sell the property or have it refinanced.
• You can hold an ex accountable. Although creditors may seek full payment from you, you can hold an ex accountable to his or her obligations under the divorce degree. This can translate to more work on your end, since you will need to go after the ex for payment, but it provides an opportunity to recoup some of the money used to cover the debts.
• Avoid reaffirmation. If you have received relief through bankruptcy, be very careful not to reaffirm any debt. This can occur in a couple of different ways, including agreeing to cover certain debts during the divorce proceeding.

Navigating through these nuances can be confusing – and these are only a few of the issues that can arise. As a result, anyone who finds themselves in a position where they are considering both divorce and bankruptcy should contact an experienced professional. A family law attorney can review these issues and provide guidance, helping to ensure you receive a beneficial outcome.