If financial impediment has put your marriage on skids and you are heading straight towards filing bankruptcy and divorce, both at a time then you better be aware of some crucial facts. Divorce and bankruptcy both can get on your nerves and can drive your life crazy, if you fail to settle some major issues like your mutual rights, liabilities to your former spouse and to children of the marriage. It’s true that Bankruptcy law can liberate a considerable portion of your debts, but at the same time can influence the obligations resulting from a divorce judgment or agreement. Read ahead, to know how your bankruptcy filing can affect the divorce consequences like alimony and child support, property settlement orders and agreements and marital debt. If you are still worried how bankruptcy will affect your divorce obligations reconsider your decisions. Make a comparative study of bankruptcy vs. debt consolidation and choose the option that suits your finances the most.
Child Support and divorce alimony during divorce
As soon as you file for bankruptcy petition, the automatic stay will go into effect. Automatic stay, which pervades on different items during bankruptcy in order to stop all collection activities won’t be applied on every item. As per the bankruptcy revisions (BAPCPA) of 2005, Child support and alimony rewards won’t be regarded as bankruptcy assets and therefore will be offered complete protection in order to preserve the basic rights of distressed bride and minor children. In short, both chapter 7 and chapter 13 bankruptcy wont influence the payer’s obligation to pay child support an divorce alimony in any way. In simpler words, the current obligations like the child support or divorce alimony could not be avoided even when bankruptcy is in process.
What happens to debts?
Joint Marital debts can take a complicated shape after divorce. The divorce judgment can force one party to bear the sole responsibility of the financial burden and can leave his or her better half free from all responsibilities. It means as per the divorce judgment only the husband could remain liable to pay the entire joint marital credit card debt whereas the wife might be liberated from all financial loads here. Filing bankruptcy won’t change the situation in any way and paying off these debts would be regarded as an alternative form of spousal support and therefore, will remain non dischargeable in bankruptcy.
Support orders
Last but no the least, contractual benefits to the ex spouse or kids in divorce like Health insurance, life insurance, and educational expenses of the offspring come under support orders and these can not relieved through Chapter 7 or Chapter 13 bankruptcy in any way. However, unlike the aforementioned points, property settlement orders and agreements after divorce are subjected to eradication and reduction under Chapter 13 bankruptcy.