If you believe that you and your partner are headed for
divorce, and you both have a lot of debt between you, it might be a good idea
to decide to file for bankruptcy before you begin to file for divorce. This
will pave the way for the divorce to proceed much more easily because it will
allow you to get rid of some of your debt and to clear the way for a clean
break. If you can file for bankruptcy, then you can have a better idea of how
to deal with the debts that do remain between the two of you. It will also mean
that if your ex files for bankruptcy later on down the road, you can be
protected because you are going to take care of your debts before the divorce.
The way it works is rather simple. When one or both of the
spouses file for bankruptcy, all of the property that has been shared by both
of them will become a part of the estate and will then be available to pay for
the debts. This will also mean that you have been granted an automatic stay,
which means that the creditors can’t hound you for money. Remember that this
stay does not prevent you from getting spouse or child support from your ex.
The next thing that will happen is that the bankruptcy court will decide what
shared property is exempt from the bankruptcy, meaning that it cannot be sold
in order to pay for your debts. Then, the divorce court can divide that
property between you and your ex spouse.
If you are trying to negotiate property settlements, and
also going through bankruptcy, you are going to be dealing with very
complicated issues. Some of the debts that might be related to a property
settlement might not be wiped out during the bankruptcy, so you will still need
to pay them. However, these debts can be wiped out if you can show that you
can’t pay the debt and still take care or yourself or your children, or that if
you wipe out the debt it is going to be better for you than the harm that would
be done to the people that you owe by not paying it. This means that if you
think your spouse is going to consider filing for bankruptcy after the divorce
is final, you need to make sure that your finances are squared away so that you
aren’t going to be faced with any more debts.
