Filing bankruptcy post-divorce is different than filing before or during a divorce. Learn more in our guide to filing bankruptcy post-divorce.
Tensions stemming from prolonged isolation are causing an uptick in divorce settlements. Baby Boomers couples are experiencing a 50% increase in divorces.
A post-divorce settlement can become a financial burden. Many divorcees will need to understand the information regarding chapter 7 and 13 bankruptcy. This guide will tell you what you need to know about filing for bankruptcy post-divorce.
Bankruptcy After Divorce
Financial burdens can lead to stress in relationships. These tensions can make or break relationships. If you are looking to file for a divorce, you may benefit from filing bankruptcy after the procedure.
Many couples will consider bankruptcy options after filing for separation. It may be one individual filing, or it may be both parties. The first thing that may change is income.
If you’re both still living in the marital home and your joint income is over a certain level, it may affect the process. The bankruptcy means test indicates you might encounter some difficulties when filing for chapter 7 because the bankruptcy court will examine the entirety of the household’s net income.
Once your divorce is final and both individuals live in separate households, the courts will look at each partner’s income separately.
Both parties should review their divorce decrees after finalizing the divorce. The divorce trustee will request the document, even if the divorce is not complete within the court systems. This will be a part of the necessary information for the 341 meetings.
Couple’s Bankruptcy and Debt Allocation
Both individuals will need to consult each other over the allocation of debt. You will need to understand what kinds of debts you share. Certain types of debt, like student loans, will still tie to their respective parties regardless of the divorce proceedings.
Some divorce decrees may contain indemnification laws. This means if one party encounters back payments or dealings with leases, a company may sue the couple.
The indemnification clause can allow one spouse to sue the other over damages from these missing payments. Bankruptcy attorneys in your area can help assess these debt allocations, especially if one spouse needs to recover the money from a negligent spouse.
Dealing with Assets
Couples must list assets from the duration of the relationship when filing for bankruptcy. If this information is not accurate, the courts can retaliate by finding the individuals guilty of perjury.
It’s important to not forget or leave out certain assets. A Bankruptcy Trustee will confirm the accuracy of this information. These trustees will assess and review all paperwork and documentation in these dealings.
These trustees will also review the decree documentation as well as provide information regarding further penalties. They will also compare the division of property to the listings of assets.
Agencies can eliminate certain debts from the court proceedings. If they have confirmation of bankruptcy filings, they can review and purge potential lingering debts.
Debts Post-Divorce
Attorney fees can be costly. Sometimes courts can settle lingering debts from these court proceedings depending on the circumstances. Negotiating with debt consolidators can help.
The debt consolidators can recoup up to 21% of the payments while compartmentalizing your debt in return. Though these payment plans can still hurt your credit, it is an effective way of eliminating all the debt.
Make sure to research any debt trustees you meet. The Better Business Bureau and other rating systems can provide useful information. The trustees can bring those bankruptcy payments down to affordable, minimum monthly payments.
Chapter 7 and Divorce
The Chapter 7 filing covers what is known as “liquidation”. Property Settlements do not become dischargeable debts when dealing with Chapter 7 and divorce. These payments will continue after bankruptcy.
Determining your eligibility will depend upon your bankruptcy forms in compliance with Bankruptcy Code. Individuals will collect Financial Documents dating back six months.
These documents chronicle pay stubs and alternate forms of income. You will need to include federal and state tax returns from at least the previous two years as well. Additionally, you will have to include documents pertaining to assets and banking statements.
Credit applications and credit report sites can help track and refer your credit information and FICO scores. Get a copy of these and list all your relevant debts before submitting them.
Any divorce filings such as a decree can lay out support obligations. This can include child support requirements, attorney fees, and attorney awards. But, if you make too much money, this may hinder your eligibility.
Though Chapter 7 can clear all debts, there are liabilities. Liens still exist so government agencies can seize assets such as cars, but only under specific circumstances. Creditors are not able to contact you after completion.
Chapter 13 and Divorce
Chapter 13 includes various plans to help repay debts. The difference here is creditors can object to the repayment amount. But, once a court approves of the discharging of certain debts, creditors have to oblige.
Interest rates are also variable when negotiating a Chapter 13 car loan repayment plan. In certain circumstances, you can even reduce the total amount owed on the car.
Filers have no obligation to omit non-exempt property because creditors receive a portion of the money. Once you enact a Chapter 13 Bankruptcy filing, the discharge clause will eliminate all repaid debt after 4-5 years of repayment.
The courts will see your debt as a serious impact on your financial stability. So, if you make enough to pay the minimum without other expenses, they will take this into account. Judges will not discharge affordable debts under your name.
Post Divorce
Banking and financial institutions will try their best to not have you settle for bankruptcy. But it is entirely up to you to negotiate these terms and do what is best for you and your circumstances.
Financial hardships post-divorce don’t have to consume your life. Declaring bankruptcy can be a legitimate way to consolidate or eliminate these debts.
Still have questions? The bankruptcy lawyers at Husker Law can help. Call (402) 415-2525 to schedule an appointment today to speak to an attorney in Omaha who specializes in bankruptcy and divorce.
