Charlotte Divorce Lawyer Blog
Divorce and Bankruptcy
Divorce can be complicated even in the best of circumstances, but it can be even more difficult when a couple is experiencing financial difficulties. In some cases, divorce intersects with bankruptcy. One or both parties may feel the need to file for bankruptcy. You may wonder how to resolve divorce when bankruptcy is one of the issues. A knowledgeable divorce attorney will answer your questions and help guide you through the divorce process.
What is Bankruptcy?
Bankruptcy is a legal process that allows debt relief for those who are unable to pay their bills. There are two main types of consumer bankruptcy, including Chapter 7 and Chapter 13. Chapter 7 liquidates your assets and repays your bills. Chapter 13 allows you to restructure your debt so you can make affordable payments. If you have an ongoing source of income, Chapter 13 may be the best alternative. You may file for bankruptcy on an individual or joint basis. It is important to note that bankruptcy is a federal filing while divorce is accomplished at the state level.
Should We File For Bankruptcy Before Divorce?
The decision to file for bankruptcy before or after divorce depends on a variety of factors. One of the first things to know is the nature of the debts and whether they are considered joint or separate. Generally, separate debts are those that one party had prior to marriage. If, as a couple, you have a large number of joint assets, you will want to consider filing for joint bankruptcy. A thorough review of your assets and debts will help you decide how to proceed. Keep in mind that even after divorce, creditors may still be able to seek repayment of non-exempt debts.
Filing Individual Bankruptcy
If you are considering filing for individual bankruptcy while you are in the middle of a separation or divorce, the situation may become more complicated. In general, when one party files for bankruptcy it will impact the distribution of assets and debts in a divorce settlement. What is likely to occur is that the divorce court will put a hold on the divorce until the bankruptcy matter is resolved. That is because during bankruptcy, a person is prohibited from dividing or selling their property. In some cases, the bankruptcy court may allow the divorce court to review assets and debts and determine each party’s interest in them.
Bankruptcy After Divorce
For many people, filing for bankruptcy after divorce may be a necessity. North Carolina requires couples to live apart for one year before they may seek a divorce. Therefore, you have time to handle a joint bankruptcy if it is needed. Filing for bankruptcy after divorce will likely not impact the other spouse. However, a significant change in financial circumstances could create a need to review child support and alimony matters for modification. Alimony and child support are typically exempt from bankruptcy. If you owe back child support, you cannot get rid of the debt through bankruptcy.
Financial issues can complicate divorce. To learn more about divorce and bankruptcy, contact us at Arnold & Smith, PLLC, at (704) 370-2828 to consult with our legal team.
The family law practice group at Arnold & Smith, PLLC includes two Board-Certified Family Law specialists and one Child Welfare Law specialist, as well as several attorneys with many years of family law experience that are committed to providing a powerful voice to individuals facing the often-tumultuous issues in this area of law. The range of issues our family law clients may be facing include pre- and post-nuptial agreements; separation agreements; post-separation support; child support (both temporary and permanent); absolute divorce; divorce from bed and board; military divorce; equitable distribution of assets; child custody (both temporary and permanent); retirement benefits and divorce; alimony and spousal support; adoption; and emancipation. Because this area of the law is usually emotionally charged and complicated, the family law attorneys at Arnold & Smith, PLLC act with the utmost dedication to ensure that each client understands his or her options, and then act to achieve the best result possible for that client’s particular situation.
Source:
https://www.nccourts.gov/help-topics/divorce-and-marriage/separation-and-divorce
https://www.uscourts.gov/court-programs/bankruptcy
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