How Divorce Affects Bankruptcy

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Unfortunately, not every marriage works out—and many of them fail due to financial issues. Whether you’re ending your marriage because you’re drowning in debt, or your divorce is the reason for your debt, bankruptcy may help you recover.

Since your marital status and divorce settlement affect your bankruptcy filing, be sure to talk to an attorney before moving forward. Here are a few things you should know before you file.

  • Bankruptcy does not absolve you from paying child support. Child support is one of the few types of debt that is never discharged in bankruptcy. If you’re struggling to pay your child support obligations, your best option may be to petition the family court for a support modification. Otherwise, the debt will continue to accrue. This can result in serious consequences.
  • You can file for bankruptcy before or after divorce. Most couples want to know whether it’s better to file before or after divorce. This is entirely dependent on what kind of assets and debt you have, and what you intend to keep after splitting. Your domestic relations and bankruptcy attorneys can work together to help you decide whether a joint bankruptcy or filing separately (before or after divorce) would be most beneficial.
  • You can file for bankruptcy jointly or separately. Whether you file jointly or separately depends on whether you’re willing to work together. For example, filing jointly doubles your exemptions, which may mean you get to hold on to valuable assets like your home. On the other hand, if only one spouse files before divorcing, the other spouse will be on the hook for joint debt that is discharged. The non-filer’s divorce attorney can negotiate for partial or equal repayment in the marital settlement.
  • Ohio is an equitable distribution state—plan accordingly. Unlike community property states, debtors in Ohio will be responsible for debts based solely on creditor agreements. Your family law judge may also order either spouse to help pay separate debts, in whole or in part. For example, this can happen when one spouse’s name is on the mortgage and the other stayed home to raise the children.
  • The division of assets in your divorce will affect your bankruptcy. Finally, when you file for bankruptcy after divorce, be prepared to list all of your assets from the divorce settlement. People who receive spousal or child support must list it as income, and people who pay support should list it as an expense. Also, transfers that took place in the divorce action will be reviewed by the Bankruptcy Court.

Divorce and bankruptcy can be convoluted, overwhelming experiences. Get the legal help you need when you call Dworken & Bernstein today.

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