Does Bankruptcy Cause Divorce?

Bankruptcy and divorce often come hand in hand. The division of assets and debts can cost a ton, so it’s often simpler and less costly to remove debts as an issue. Moreover, divorce often means taking on more living expenses and having less income to fund them so bankruptcy can suddenly become attractive when even just a few weeks ago it seemed unthinkable.

For most of us the margin between servicing our debt loan, let alone making progress towards paying it off, is thin at best. Once you cut the income in half, double up the expenses and add divorce attorney fees, things get pretty grim in a hurry.

If you and your spouse are set to start the dissolution process, it’s often a great move to file bankruptcy first. Why not start the single life, debt free? Furthermore, why not hand over fewer of your hard earned dollars to your respective divorce attorneys by taking a major issue for them to fight about completely off the table. It’s also cheaper to file together at Phoenix Fresh Start Bankruptcy Attorneys because we don’t charge you anything extra to file together.

Just make sure you tell your family law attorneys what you’re doing, so you can avoid any potential conflicts of interest. Also, this discussion presupposes that there are no conflicts.

If you want to file Chapter 7 and have a joint car loan or home loan that only one of you wants to pay or keep. It might not make sense for you to file together. It doesn’t mean that you can’t but it raises an issue that you will want to discuss with your bankruptcy attorney. Similarly, if you want to enjoy the benefits of filing Chapter 13 together this probably won’t be possible if one of you is going to owe child support or alimony to the other or if you have secured obligations that you can’t agree on how to handle. Obviously, filing bankruptcy may still be an excellent idea even if you can’t file together. It just might mean that your attorney fees will be a little bit higher than if you filed jointly.

Again, a big advantage of bankruptcy is that If you can file a joint Chapter 7 bankruptcy prior to the dissolution, it will likely be way easier to divide your property, and you’ll no longer face the debt you managed to discharge. If you are not able to jointly file bankruptcy before your divorce decree is entered, the court may end up assigning your marriage debts before you get down to dividing the assets. But it’s a messy solution. Sure, the court may assign debts to your spouse, but in a community property state like Arizona, the creditor doesn’t have to obey the court order if your spouse does not pay the debts he or she was assigned by the court.

Contact us

If any of the above confuses you, you’re not alone. At Phoenix Fresh Start Bankruptcy Attorneys, we are happy to sit with you and determine what kind of filing, if any, is in your best interest. Give us a call today.