When family and financial challenges intersect, it can be overwhelming. Divorce and bankruptcy are two of the most impactful legal matters individuals face, and unfortunately, they often occur together. A lawyer, like a trusted family law lawyer, understands that knowing how family law and bankruptcy interact can help you make informed decisions about your financial and personal future.
Bankruptcy And Divorce Timing
When bankruptcy and divorce are on the horizon, the timing of each can have major financial implications. Filing for bankruptcy before divorce may be beneficial if both spouses are experiencing debt problems, as it allows them to eliminate some types of debt together. Jointly filing for Chapter 7 bankruptcy before divorce, for instance, can clear unsecured debts in just a few months, allowing both parties to proceed with fewer financial obligations.
On the other hand, the team at Arizona Bankruptcy Lawyer knows that if only one spouse is burdened by debt or if there are complex property issues, it may be more practical to file for bankruptcy individually, either during or after divorce. Working with an attorney who understands both bankruptcy and family law can help you decide on the best approach based on your specific financial and personal situation.
Division Of Marital Property And Bankruptcy
Divorce involves dividing marital property, which can become complicated if one or both spouses declare bankruptcy. In a bankruptcy filing, most property is subject to a process called the “automatic stay,” which halts creditors from pursuing debts. This stay can affect divorce proceedings, as it can delay property division until the bankruptcy process is complete.
Chapter 13 bankruptcy, which involves a multi-year repayment plan, may complicate property division more than Chapter 7 bankruptcy, which typically resolves faster. Attorneys can attest that timing and coordination between divorce and bankruptcy proceedings are crucial. Understanding the impact of bankruptcy on marital property division can help you avoid delays and other complications.
Impact On Child And Spousal Support
Child and spousal support are critical components of family law, providing necessary financial support for children and former spouses after a divorce. It’s important to understand that bankruptcy does not discharge child support or spousal support obligations. This means that even if one spouse files for bankruptcy, they are still legally obligated to fulfill any support responsibilities outlined in the divorce decree.
If you are owed child or spousal support and your former spouse files for bankruptcy, your right to receive support is not affected. However, collecting past-due support may require action, as bankruptcy can affect how quickly creditors receive payments. You may need to work with an attorney to protect your right to collect any support owed to you.
Bankruptcy And Joint Debts
In marriages, it’s common for spouses to hold joint debts, such as mortgages, car loans, or credit cards. When one spouse files for bankruptcy, it can impact the other spouse’s financial responsibilities. In Chapter 7 bankruptcy, for example, if only one spouse files, creditors may pursue the non-filing spouse for the entirety of joint debts. In these cases, the non-filing spouse may want to consider filing for bankruptcy as well or exploring other options for managing joint debt.
Chapter 13 bankruptcy can provide more protection for the non-filing spouse, as it involves a structured repayment plan rather than liquidating assets to cover debts. This option can give the couple time to address joint debt issues without immediately affecting the non-filing spouse’s financial standing.
Working With Legal Support
Bankruptcy and family law are interconnected in ways that may not be obvious at first. Decisions about when to file, how to handle debt, and how to approach support obligations can have lasting consequences. Working with an attorney who understands both areas of law can help you make decisions that protect your financial interests and the well-being of your family. Our friends at Robinson & Hadeed discuss the importance of planning for the long term in family law cases where bankruptcy is a factor. If you’re facing family law and bankruptcy issues, consider consulting an experienced attorney who can provide the guidance you need to make the best choices for your situation. Speak with your local lawyer today.