When couples face both bankruptcy and divorce, their financial and emotional stress can intensify.
Bankruptcy can complicate the divorce process in several ways. It can impact property division, debt distribution and even the overall timeline of the divorce.
Bankruptcy and property division
Bankruptcy can affect the division of marital property. In a divorce, couples must divide their assets fairly. However, if one or both spouses file for bankruptcy, the bankruptcy court might take control of their assets. The court will decide how to use these assets to pay off debts, which can disrupt the property division process in the divorce. This can lead to confusion and disputes over what remains for each spouse.
Bankruptcy and debt distribution
Debt distribution also becomes more complex when bankruptcy is a factor. In a typical divorce, the couple divides their debts just like their assets. However, when one spouse files for bankruptcy, the responsibility for certain debts can shift. For example, if bankruptcy discharges one spouse’s debt, the other spouse might become responsible for paying it off. This can create an unfair financial burden on the non-bankrupt spouse.
Bankruptcy and the divorce timeline
Bankruptcy can certainly impact the overall timeline of the divorce process. Filing for bankruptcy triggers an automatic stay, which pauses most legal proceedings. This stay can delay the divorce until the bankruptcy case resolves, extending the emotional and financial strain on both parties. The longer process can also increase costs, adding another layer of stress.
Bankruptcy and child support
Bankruptcy can even affect spousal and child support. While bankruptcy does not discharge these obligations, the financial strain it causes can influence the ability to pay. This might lead to disputes over support amounts and the need for modifications, complicating the divorce further.
The United States Courts report that there were 452,990 total bankruptcy filings for the year ending December 2023. Bankruptcy is a common and valid method of debt relief, and it is entirely possible that you might make the decision to divorce while still undergoing the bankruptcy process. It is important to keep in mind, though, that tackling a bankruptcy and a divorce at the same time can bring unique burdens.
