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Joint debts and divorce: What happens when an ex-spouse files for bankruptcy?

On Behalf of | Jun 18, 2024 | Bankruptcy

Divorce often involves untangling financial ties, including joint debts. During the divorce, the parties generally divide joint debts as part of the property settlement portion of the proceeding. The divorce decree then outlines each spouse’s responsibility. Ideally, the parties will collaborate to negotiate debt division and ensure the divorce decree specifies each party’s responsibility.

Sometimes these debts become unmanageable. When an ex-spouse files for bankruptcy, it can complicate matters. This is because joint debts are obligations shared by both spouses during marriage. These may include mortgages, credit cards, or car loans.

What are the legal implications for the non-filing spouse?

Bankruptcy cancels the filing spouse’s liability. Creditors may still pursue the non-filing ex-spouse for payment. As a result, the non-filing spouse may notify the bankruptcy court with a copy of the divorce decree. Courts may deem joint debts non-dischargeable.

How can the non-filing spouse protect their financial interests?

It is important for the non-filing spouse to monitor bankruptcy proceedings and seek legal advice promptly.

It helps to review credit reporting and dispute any incorrect information related to discharged debts. It can also help to consider refinancing. In some situations, it may be advantageous to refinance joint debts to remove your ex-spouse’s name.

How does bankruptcy impact alimony and child support obligations?

Bankruptcy generally does not affect child support or alimony (spousal support) obligations. These often remain even if the court otherwise approves the petition for relief through bankruptcy.

Remember, bankruptcy generally does not erase joint debts — it shifts responsibility. As a result, anyone that finds themselves in this situation is wise to take steps to better ensure they understand the impact of the process.

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