In most cases, divorces can be as taxing for your finances as they are
for your emotions. It can be expensive to hire mediators and litigators,
especially if you are already dealing with financial difficulties. According
to statistics, 1 in every 10 petitions for bankruptcy names divorce as
a leading cause. This brings up the question of how bankruptcy and divorce
are affected by one another. This blog aims to clarify the relationship
between the two.
Chapter 7 and Chapter 13 Bankruptcy
Chapter 7 bankruptcy is known as the liquidation of assets that are not secured. This includes
credit cards, medical bills, etc. In order to have the debts cancelled,
individuals relinquish their assets. In contrast,
Chapter 13 bankruptcy refers to a restructuring of debt where the individual has three to five
years to pay of the accumulated debt. Usually this is done through a payment
plan that is monitored by an appointed executor.
In terms of divorce, some individuals look towards bankruptcy to offset
the cost of separating. Under both Chapter 7 and Chapter 13 bankruptcy
laws, neither child nor spousal support can be legally written off. However,
for non-support obligations, usually in the form of property settlements,
there can be adjustments made under Chapter 13.
Some questions in deciding what a support obligation is and what a property
settlement is are:
- What need was there for support during divorce?
- Are payments made in lump sums or installments?
- Are their children involved?
- Do payments seize based on certain events?
How to Safeguard Yourself from Bankruptcy
It is a fact that divorces can sometimes be very expensive. An experienced
divorce attorney can help you create a plan to help offset the costs.
If you and your spouse are in communication, it is wise to discuss financial
matters with them. Vocalize your monetary needs and collaborate on how
you can ease fiscal strain after the split. You should also contact your
lawyer to communicate your needs to them. They can help you fight for
After discussing needs, debts, and assets, it is prudent that you come
up with a financial plan. This will allow you to keep track of finances
and what you can afford. It will also ensure that everyone is on the same page.
Here are some things to help create an effective plan:
- Collect important financial documents such as tax returns, bank statements,
and credit card statements.
- Discuss your situation with a financial counselor to better understand
the situation and your circumstances.
- Be observant. If you believe your ex is hiding information about their
assets or finances, talk to your lawyer.
Divorce can be emotionally, physically, and financially draining. If you
are going through a divorce, contact our experienced Rancho Cucamonga
divorce attorneys today. We will review your case and inform you of your
legal rights. We fight for our clients’ best interests. Call for
a free consultation today.