Divorce and bankruptcy are two legal areas that can have a tremendous impact
on your future, as well as some overlap. Although every divorce case is
different, finances are a major element that must be addressed, especially
when there is debt and liabilities involved. Our New Jersey family law
attorneys have worked with many clients dealing with bankruptcy and divorce,
and we have the experience to help clients navigate the added challenges
toward a brighter future.
If you are considering
divorce and have financial concerns for which bankruptcy may be an option,
timing will be the most important factor to consider. Spouses will also need
to consider whether they should file bankruptcy
jointly or individually. Based on your unique circumstances, you may consider filing bankruptcy
first, or filing divorce before addressing bankruptcy.
Filing bankruptcy first – Filing bankruptcy jointly before filing for divorce can allow spouses to
address all debts in one case and eliminate or substantially reduce debt
loads. It may also help spouses qualify for Chapter 7 bankruptcy and discharge
most or all unsecured debt through a process that only takes a few months.
If spouses file Chapter 13 jointly, both parties will be responsible for
making payments toward their debt until the conclusion of the payment
plan, after which remaining unsecured debt will be discharged. If one
or both spouses file bankruptcy before or during divorce, family courts
will not divide property or debt until permitted by the bankruptcy court.
Filing divorce first – Filing divorce before bankruptcy may be an option for spouses who
do not qualify for Chapter 7 bankruptcy using their joint income. By filing
separately, one spouse or even both spouses may be able to qualify for
Chapter 7 without having to make monthly payments toward debt under a
Chapter 13 plan. Filing divorce first also provides a clear judgment on
division of assets, which may help shield a spouse from certain liabilities
that now belong solely to the other – such as when one spouse takes
a house during divorce. However, spouses may still be liable to creditors
even if one party was ordered in the divorce to pay a certain debt. Judgments
handed down by the family court regarding
child support payments can also help during a later bankruptcy, as it will be clear
how much one party has to pay in support or how much income they will
receive. Keep in mind that support payments are non-dischargeable, and
will not be stopped during the automatic stay that comes with bankruptcy.
There is a lot to consider when pursuing a divorce and bankruptcy, and
the path you take will ultimately depend on your unique situation. Our
lawyers can help you better understand your rights and options during
this time, and can assist you in making an informed decision about when
and how you should file.
Discuss your options with an attorney from our team during a FREE consultation.
Contact Moskowitz Law Group, LLC today to get started!