Sometimes financial problems are stress factors that lead to divorce. And, people who decide to divorce often consider bankruptcy as well. So, while divorce and bankruptcy may go hand in hand, it is important to realize that divorce changes the rules somewhat for bankruptcies. Divorce and bankruptcy become associated in several ways. Divorce addresses debts that couples have when working out property division. The court may decide that you must protect your spouse from debts to creditors by ensuring these debts are handled. Or the court may require your spouse to pay you a certain amount of money as a result of dividing a piece of marital property. Assets are also subject to bankruptcy rules.
So let's say that after divorce, you find the debt overwhelming and want to file bankruptcy to have it discharged. Bankruptcy code Section 523(a) (15) prevents you from discharging any debts you incurred through divorce when filing Chapter 7 or Chapter 11. But, if you decide to file Chapter 13, you are free to have this debt discharged. Also, certain debts you may acquire during divorce such as child support or alimony are considered priority debts and you cannot discharge them no matter which type of bankruptcy you file.
If you know ahead of time that you plan to file for divorce and also plan to file for bankruptcy, consult divorce lawyer and a bankruptcy lawyer during the planning stages. Their advice can spare you from being saddled with certain tax liabilities and non-dischargeable debts.
Harold Shepley & Associates is a full service Pennsylvania debt relief law firm with considerable experience handling bankruptcies. Arrange a free consultation to discuss your financial issues.