Despite the prevalence of adultery issues featured on reality television shows or even the national hacking scandal involving the “Ashley Madison” website, the most common cause of divorce remains financial disagreements. The dramatic toll on marriages caused by financial difficulties is predictable because most families face financial pressures periodically regardless of their income status or net worth. These financial challenges often merit consideration of bankruptcy by divorcing couples, but sometimes the level of animosity and distrust between divorcing parties can make it difficult to contemplate cooperation in seeking bankruptcy protection. This blog post answers frequently asked questions (FAQs) about bankruptcy in the context of a Kansas divorce.
Why file for divorce if my spouse is agreeing to take responsibility for the majority of our debts in our marital dissolution?
While the divorce decree might assign some or all of the joint debts to your spouse, this document is only effective between the parties to the divorce. In other words, a marital settlement agreement with a spouse that becomes part of a divorce judgment does not have the legal impact of nullifying a creditor’s contractual rights. If both parties signed the application or the credit of both spouses was used to obtain the credit, the creditor can still pursue either party to collect the amount owed. A Chapter 7 Bankruptcy filing that discharges the debt will avoid the unpleasant scenario of a lien being filed against a house you purchase in the future or your wages being garnished because your ex-spouse failed to pay a debt. While you can still seek reimbursement from your ex-spouse, this is an empty remedy if he does not have assets or anything more than modest income.
Can we decide to file jointly for bankruptcy after we have completed our divorce?
Federal law and state law in Kansas permit two former spouses to file a joint bankruptcy petition after their divorce becomes final. This joint filing will save money because dual attorney and bankruptcy filing fees are avoided.
Are there strategic reasons to file with my spouse even if we are contemplating divorce?
There are a number of reasons to file divorce jointly with a soon to be ex-spouse. The debts can be discharged for both you and your spouse, so the debt does not need to be part of the division of assets and debts in the divorce process. Further, the need for contingency plans if the spouse who is assigned the debt fails to pay it becomes unnecessary. This will mean that fewer debt issues need to be resolved during the divorce resulting in lower costs and attorney fees. The ability of spouses to qualify for higher exemptions when filing jointly can also present a strategic advantage allowing for the protection of more assets under the bankruptcy exemption system. The amount of income that you can earn as a household to qualify under the Chapter 7 means test also will be higher if you jointly file for bankruptcy prior to completing your divorce.
Will the double whammy of divorce and bankruptcy permanently damage my credit and future financial security?
Creditors recognize that people go through major life events like a divorce, so they pay attention to your pattern of payments after a divorce and bankruptcy. Because you are no longer saddled by financial obligations that you cannot afford to pay, your credit rating will start to improve over time. Most creditors would rather take a risk on someone with a bankruptcy and solid post-filing credit history than someone who is continuing to struggle with late pays and write-offs.
How can I work with a spouse I am divorcing to file for bankruptcy?
Parties to a divorce have affirmative duties regarding financial disclosure of assets, debts, income, and expenses. Since this information must be shared in the divorce proceeding, there often is not much more cooperation required to participate in the bankruptcy process. Although you might have to appear in front of the trustee or bankruptcy court together at some point, you can have an attorney with you just like during the divorce.
If you have questions about financial issues like the division of property and debts or other financial aspects of a divorce, we invite you to call the Wichita Family Law Attorney at the Weber Law Office at 316-265-7802 or to submit an inquiry form through this website to schedule your initial consultation.