Believe it or not, a Divorce is usually a primary predictor of a Bankruptcy filing. A significant number of Bankruptcy filings are motivated or precipitated by divorce filing, and the debt liabilities associated or arising from a previous marriage.
In Texas which is a community property state, many people who file for divorce often choose to file for bankruptcy or at least consider the possibility of filing bankruptcy to address their debt arising from their former marriage. It’s quite common for people going through divorce to be under extreme financial stress and economic difficulty. Bankruptcy can sometimes be a way to get control or regain control of your personal finances in certain divorce situations. In the State of Texas and everywhere else in the United States as far as we know, there is no law that says that two people must stay married. There are however, laws that hold people who were once married liable for certain financial responsibilities for the debts incurred while they were married or obligations that arise out of marriage dissolution such as child support, spousal maintenance or alimony. Although a divorce decree most always outlines whose responsibility it is for each debt, the effect on a person’s credit or the collection activity from a creditor after divorce can be an entirely different matter. Despite a divorce decree transferring or making certain debts the sole responsibility of a particular spouse after a divorce, it will not likely stop creditors from attempting to collect debts incurred by one or both spouses before the divorce. Debts incurred in the course of marriage will also stay on your credit report for years after the divorce even if the marital settlement agreement states another spouse is now solely responsible for payment.
If you are planning to file for divorce or are in the middle of a divorce proceeding it may be a wise choice to at least examine your options under the Bankruptcy Code. A Bankruptcy may be able to provide a fresh financial start or the ability to adjust your debts before or after a divorce. Should you or your current spouse in fact be thinking about bankruptcy & divorce, you should keep in mind that the way you or your divorce attorney word your divorce settlement agreement, will have a significant impact on how the filing for Bankruptcy affects your divorce, and vice versa. It is often a good choice to wait until your divorce is finalized before filing for Bankruptcy, as you will have a much clearer picture of you financial condition and personal debt obligations after the divorce is final.
Alternately, if either you and your soon to be ex spouse are thinking about Bankruptcy, you may want to consider jointly filing for Bankruptcy before you file for divorce. This way you will be more likely to know what financial obligations will be discharged when you actually do file for divorce. And, you may also be able to better negotiate with each other with the full knowledge of what you’ll both be facing in both remaining debt as well as available property. A joint Bankruptcy filing before divorce will probably save you at least some money, since you'll only pay for one bankruptcy filing as compared to two, and as such your divorce might be much less complicated. This scenario is only possible if both you and your soon to be ex spouse are willing to work together before filing divorce. It may not be possible to work together with your soon to be former spouse. It is understandable that not all divorces are amicable situations. Many are not open to reasonable negations and tend to become unpleasant & emotionally charged when the issues of finance and marital debts arise.
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