Bankruptcy and Divorce

Unfortunately, divorces often come at inconvenient times. After all, your debt doesn’t care how your marriage is doing. So if you are in the unfortunate position of facing a divorce and serious debt at the same time, there are a few things you need to know.

Bankruptcy First

If you and your spouse are thinking of getting a divorce but are also saddled with heavy debt, declaring bankruptcy before filing for divorce can help cancel some of the communal debt. Once one or both spouses file for divorce, the mutual property acquired throughout the marriage becomes part of the greater bankruptcy estate. The bankruptcy estate is the property that can be sold to cover outstanding debt.

But when you file for bankruptcy, a legal automatic stay stops creditors from attempting to collect most debts. For divorce purposes, though, an automatic stay does not prevent a court from ordering you or your spouse to pay alimony or child support.

Divorce

Once the court has separated the estate, it will decide which property is exempt from the bankruptcy sale and a divorce court will then divide that property. The non-exempt property is used to pay off mutual debt. However, by their very nature, it is both difficult and complicated to negotiate a property settlement in a divorce while declaring bankruptcy.

Contact Us

If you or someone you love is facing a divorce or bankruptcy, contact the West Palm Beach bankruptcy and divorce attorneys of Eric N. Klein & Associates, P.A. by calling 561-353-2800.