Both divorce and bankruptcy are avenues for a fresh start in life. Interestingly, the two often precede each other because, for some reason, marriage stability is usually affected by financial instability. Again, divorce involves a lot of financial obligations that can push ex-spouses into unmanageable debts.
Marital assets are often affected during bankruptcy, and the decision on whether to involve your soon-to-be-ex depends on the circumstances. Consider speaking to Tennessee family law attorneys at Davis Law Firm about your situation to get reliable legal advice. It is safer to make decisions that will protect your interests.
Does Bankruptcy Affect the Length of the Divorce Process
Filing for bankruptcy cannot stop custody, support actions, or the divorce process. It only delays the process of asset distribution in divorce until the bankruptcy case is complete. In between three and six months, your debts for Chapter 7 bankruptcy will have been discharged, and you can proceed with the marriage dissolution.
The divorce might be dragged if you opt for Chapter 13 bankruptcy because the process can take three to five years. But if you opt to proceed with the divorce before the discharge is complete, you will have to cancel the debt repayment plan and restructure. The plan can be divided into two cases, and each spouse can handle the bankruptcy separately.
Is it Ideal to File for Bankruptcy Before or After Divorce
If you are yet to divorce, you and your soon-to-be-ex can qualify for Chapter 7 bankruptcy if your combined income is low and hasn’t exceeded the maximum limit. The advantage is that you will protect more property because the exemptions amount is higher for spouses. What’s more, you get to spend less on legal and court fees.
Spouses that earn high incomes may have to wait until they are divorced to file for Chapter 7 separately. Alternatively, a Chapter 7 bankruptcy attorney in Kingston, TN, can help you file jointly if you live in separate homes. Your total income less the expenses of both residences can pass the means test for Chapter 7.
Can Bankruptcy Erase Back Child Support I Owe?
Child support provisions in bankruptcy law require one to make child support payments before paying taxes and all other debts. For instance, proceeds from Chapter 7 bankruptcy first go to child support before any other creditor is paid. However, your ex must first prove that you owe some amount in back child support by presenting the necessary documentation in court.
If there are no assets to offset your debts, your child support arrears still remain on record. And you cannot receive a Chapter 13 discharge if your child support payments are not up-to-date. A knowledgeable Tennessee bankruptcy attorney can guide you on including all the priority financial obligations in your repayment plan.
Can Bankruptcy Affect My Alimony Obligations?
Your alimony obligation to your soon-to-be-ex may not remain the same after you file for bankruptcy. It is assumed that you have filed for bankruptcy because your financial obligations have become overwhelming, and you need a plan to redeem yourself from the mess. Therefore, you may not be required to pay the same alimony amount you paid before filing for bankruptcy.
The figure can be modified to suit your current financial situation. The court can establish an agreement with your soon-to-be-ex based on your petition or decide on the new amount based on other factors. In some instances, alimony can be discharged. A family attorney lawyer serving Crossville and Kingston can help clients determine their alimony obligation possibilities.
What Happens to Co-Signed or Joint Credit Obligations
Chapter 7 bankruptcy can discharge you of most, if not all of your debt obligation. However, your soon-to-be ex-spouse retains his/her duty as a cosigner or joint owner of the loan. Thus, the lender can ask them to make payments once you are declared bankrupt.
Notably, a divorce agreement cannot wipe away their responsibility as a cosigner. The credit agreement is usually that the cosigner will step in if the debtor cannot continue with the payments. And that does not change when your marital status changes upon divorce.
What Options Does My Ex Have Regarding Co-Signed Credit?
Telling the lender to take them off of the account may not work for your soon-to-be-ex. It is in the lender’s best interest to have many incomes and people tied to the debt. Thus, many lending institutions may not be willing to voluntarily remove someone from a loan that they co-signed.
If your ex has sufficient credit, they can opt to refinance the loan. And if they run out of other options, they can decide to also file for bankruptcy. They will be able to wipe out joint gym memberships, utility bills, credit card balances, car payments, and mortgages.
What Happens to My Personal Assets if I File for Bankruptcy?
Unsecured assets are treated differently depending on who has rights to them at the time. Also, the process that occurs first determines what will happen to those assets. If you file for bankruptcy first, the assets are transferred to the bankruptcy estate. This means that it will not be available for distribution to your soon-to-be-ex.
Sometimes, the bankruptcy comes after a separation or divorce agreement that allowed the assets’ transfer to the ex-spouse. In such instances, the property will not be available to the bankruptcy trustee and creditors. Notably, the process of transfer should not have involved fraud.
Legal Guidance From a Compassionate Tennessee Family Lawyer
The difference between defeat and success in your bankruptcy case is in the attorney you will choose to walk the journey with. It isn’t uncommon for a soon-to-be-ex to frustrate your endeavors to redeem yourself from overwhelming debt. But a skilled, knowledgeable, and experienced bankruptcy attorney serving both Kingston and Crossville, TN, can protect your interests and guide you in every step.
In instances where your ex is involved, the attorney can represent you and your interests well. Bankruptcy and divorce are complex and dramatic cases. Let a legal expert help you cut through the confusion and chaos.
Call us today at (865) 354-3333 to schedule a free consultation with us!