Divorce

Divorce and Bankruptcy

By Ginita Wall, CPA, CFP

My husband is a spendthrift and we are deeply in debt. Money, or rather, the lack of it, is a constant source of irritation in our marriage, and we have talked about divorce in the past. Now, due to his business problems, my husband says we may be facing bankruptcy. If I go ahead and file for divorce, will that protect me from his bankruptcy?

Money problems can frequently put a marriage on the skids, and bankruptcy can derail a divorce as well.

If you are married and your husband declares bankruptcy, your attorney may advise you to join with your husband in filing for bankruptcy, particularly in a community property state such as California.

A joint bankruptcy will wipe the slate clean for both of you. If you don't join in the action, when his bankruptcy gets him off the hook for joint debt the creditors will pursue you to collect the full amount.

If you are in the process of divorce when he files for bankruptcy, your divorce proceedings will come to a screeching halt until the bankruptcy proceedings are complete.

If the divorce is complete before your husband files for bankruptcy, you may not be dragged into bankruptcy yourself. However, if your financial situation is such that your debts will force you into bankruptcy, it probably will be cheaper for you and your husband to file jointly for bankruptcy before you complete your divorce proceedings.

Each situation is different. Consult a competent bankruptcy attorney who represents debtors to find out what works best in your situation. Bankruptcy should not be taken lightly, but too many people delay facing the inevitable, and do themselves irreparable financial harm in the meantime.

If bankruptcy is inescapable, its better to confront it now head on.

At WIFE we welcome your comments. Please feel free to contact us.

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