Going through a divorce can be a challenging legal matter all by itself. When couples add additional issues like filing separately for bankruptcy the situation can become extremely volatile and convoluted.
Community Debt
The main challenge divorcing couples face in filing for bankruptcy is discharging community debts. Community debt is defined as debt that is incurred during the marriage and which benefited both spouses (aka "the community"). Couples may file jointly to discharge the debt or a spouse may file separately. Filing separately discharges the debt but in a situation where both spouses signed for the debt then only the filing spouse’s responsibility for the debt, and not the actual debt, is discharged. The creditor could still hold the other spouse, who has not filed for bankruptcy, responsible for the debt.
There are two common scenarios where a bankruptcy can drastically affect a divorce; 1) a spouse filing bankruptcy before the divorce is finalized and 2) a spouse filing bankruptcy after the divorce and discharging debt agreed to in the divorce decree.
Filing Bankruptcy Before Divorce is Final
In our first scenario you have one spouse filing bankruptcy before finalizing the divorce. The wife files for bankruptcy before the divorce is final which discharges her responsibility for the community debts. This could leave the husband 100% responsible for any community debts. Depending on the circumstances the judge in the divorce may attempt to offset the division of property by ordering the wife to be responsible for additional debts or award the husband additional property. What if there are no additional debts or the property cannot be easily divided? This situation can make a simple divorce complicated.
Filing Bankruptcy After Divorce
In our second scenario a spouse files for bankruptcy after the divorce has been finalized. As part of the divorce decree the husband agrees to be responsible for the community credit card debt that has a balance of $10,000. After the divorce is final the husband files for bankruptcy. The bankruptcy discharges the husband’s responsibility to pay the $10,000 credit card. Creditors are not legally obligated to follow the divorce decree that states the husband responsible for the debt. Because the credit card is in both names the creditor may hold the wife responsible for the remaining balance. The husband could be held in contempt for not following the divorce decree, but again it causes complications and potentially further litigation.
Divide Debt First
The solution to these types of issues is aligning the debts divided in the divorce decree with the responsible party. This is not a simple task as community debts are not always easily divided into perfect halves. Be sure to consult with an divorce & family law attorney if you are filing for divorce and there is even a slight possibility of a bankruptcy being filed.
About the Author: Stacy M. Rocheleau, Esq., has been a lawyer for over ten years. Her firm Rocheleau Law is located in Las Vegas, NV and practices primarily in Divorce, Child Custody, Family Law, Personal Injury, Car Accidents and Civil Litigation. Stacy may be reached at 702-914-0400 or rocheleaulaw.com.
