WHAT SHOULD YOU KNOW IF YOUR EX-SPOUSE IS FILING FOR BANKRUPTCY.

According to data published by the United States Federal Courts, there were 1,221,091 bankruptcy filings between December of 2011 and December of 2012.  Of these bankruptcy filings, 1,181,016 were non-business filings.  In total, 828 filings occurred in the District of Columbia, 23,200 occurred in the state of Maryland, and 28,726 occurred in the state of Virginia.

Many factors can lead to someone making the decision to file for bankruptcy.  Medical expenses, job loss, uncontrolled spending, unexpected disasters, and divorce are commonly cited as factors contributing to the decision to file for bankruptcy.

FINANCIAL STRAINS ASSOCIATED WITH THE DIVORCE PROCESS CAN LEAD TO BANKRUPCTY.

Divorce comes with significant financial burdens.  Partners who were accustomed to sharing routine expenses, now have to maintain separate households.  In addition, divorce entails significant legal fees, the division of marital assets as well as, child support and/or alimony obligations.  These changes can have serious consequences on an individual’s financial health.  As such, it is not uncommon for individuals to file for bankruptcy during or immediately after a divorce.

THREE THINGS YOU SHOULD KNOW IF YOUR FORMER SPOUSE IS CONSIDERING BANKRUPTCY.

If your former spouse is considering filing for bankruptcy, you may be wondering how this will affect your divorce.  There are several things that you should keep in mind.

1. Bankruptcy does not eliminate domestic support obligations.

Filing for bankruptcy will not eliminate your domestic support obligations such as, child support or alimony.  In 2005, the Federal government passed the Bankruptcy Abuse Prevention and Consumer Act (BAPCPA).  This legislation was enacted to prevent former spouses from filing for bankruptcy in order to avoid their domestic support obligations.  Pursuant to this new law, domestic support obligations are considered priority claims which cannot be discharged during bankruptcy.

2. Chapter 7 bankruptcy does not eliminate property settlement debts.

BAPCPA also prevents former spouses from avoiding property settlement debts when filing for Chapter 7 bankruptcy.  A Chapter 7 bankruptcy involves the liquidation of assets.  However, property settlement debts remain dischargeable in Chapter 13 bankruptcy, which involves the adjustment of debts.

3. Unless you are a co-signer on your former spouse’s credit cards, you will not be responsible for their debt after bankruptcy.

When it comes to credit card debt, that which is incurred during the course of a marriage is the joint responsibility of both parties only if you are both co-signers on the credit card.  You are not responsible for your former spouse’s credit card debt just because you are or were an authorized cardholder.  There is an exception to this rule in community property jurisdictions, but this does not apply to the District of Columbia, Maryland, and Virginia.  Therefore, if your former spouse is filing for bankruptcy, you do not have to worry about creditors coming after you for the debt unless you were a co-signer on the credit card.

If you or your former spouse are considering filing for bankruptcy, you should contact an attorney immediately to discuss how this will impact your financial obligations and entitlements.

RELATED BLOG POSTS: Social Security Payments as Child Support, Modification of Child Support.

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