Going through a divorce is often emotionally challenging and can be financially draining. One of the major financial hurdles individuals face during and after a divorce is managing joint debts. These are debts that both spouses share, such as credit card bills, personal loans, medical expenses, and even mortgages. When it comes to divorce and debt division, many people are uncertain about how to manage these joint debts. In many cases, bankruptcy may offer a solution to relieve financial stress and help both parties achieve a fresh start. In this blog, we’ll explore how bankruptcy can help manage joint debts after divorce and discuss the options available to you.

How Joint Debts Are Handled in Divorce

When you divorce, the court will typically divide assets (like property) and liabilities (like debts) between both spouses. However, it’s important to note that joint debts are not automatically erased just because a divorce is finalized. Even after the divorce, both individuals may still be responsible for paying these debts, particularly if they are not clearly assigned during the divorce settlement.

For example, if you and your ex-spouse have a joint credit card, you may both remain responsible for paying off the debt, regardless of who gets to keep the card. If one spouse fails to pay their share, the creditor can still pursue the other spouse for the remaining balance, which can cause a lot of stress and financial hardship.

How Bankruptcy Can Help with Joint Debts After Divorce

If you’re struggling with joint debts after a divorce, filing for bankruptcy might offer a way to eliminate or reorganize these debts. Here’s how bankruptcy can help:

Chapter 7 Bankruptcy: Discharging Unsecured Debts

Chapter 7 bankruptcy, often referred to as “liquidation” bankruptcy, is a common solution for those who are overwhelmed by unsecured debt, such as credit card bills, medical bills, and personal loans. Filing for Chapter 7 bankruptcy can discharge (eliminate) many of these debts, giving you the opportunity for a fresh financial start.

• How It Works for Joint Debts: If you and your ex-spouse have shared credit card debts or medical bills, Chapter 7 bankruptcy can discharge your portion of the debt. However, the other spouse may still be responsible for their share unless they also file for bankruptcy.
• What to Consider: If your ex-spouse isn’t able or willing to file for bankruptcy, you may still find yourself liable for debts assigned to both of you. In that case, filing for Chapter 7 may provide relief for the debts in your name.

Chapter 13 Bankruptcy: Reorganizing Debt and Catching Up

Chapter 13 bankruptcy is different from Chapter 7 because it allows individuals to reorganize their debt into a manageable repayment plan over 3 to 5 years. This can be especially beneficial for individuals who have secured debts, like mortgages, car loans, or certain back child support payments.

• How It Works for Joint Debts: In Chapter 13, both spouses can file together or separately. If joint debts are part of the bankruptcy, they will be included in the repayment plan, and you can work with your bankruptcy attorney to make affordable monthly payments to pay off the debt. If you file separately, you will still be liable for your share of the joint debts, but the bankruptcy filing may relieve the pressure by restructuring the debt.
• Avoiding Garnishments and Collections: Chapter 13 helps stop wage garnishments, collection calls, and lawsuits, allowing you to catch up on any missed payments.

What Happens to Joint Debts in Divorce and Bankruptcy?

One of the main concerns when it comes to bankruptcy and divorce is what happens to the debt after the case is discharged. Here are a few key things to consider:

1. Joint Liability: If both parties are still legally responsible for joint debts after divorce, bankruptcy may not fully relieve you from the debt if the other spouse doesn’t file. For example, a credit card company can still pursue both of you for the remaining balance.
2. Debt Division in Divorce: If you are in the process of getting a divorce and filing for bankruptcy at the same time, the division of debts should be clearly defined in the divorce settlement. Bankruptcy can eliminate many of these debts, but it’s crucial to ensure that the divorce decree specifies who is responsible for paying each debt.
3. Impact on Property Division: Bankruptcy can sometimes affect the division of assets during a divorce. If assets are involved in the bankruptcy estate, the bankruptcy trustee may need to be involved in dividing them.

Take Action to Secure Your Financial Future

Dividing joint debts during a divorce can be complex, but bankruptcy provides a valuable option for individuals looking to reduce their debt burden and move forward with their financial lives. Whether you file for Chapter 7 or Chapter 13, bankruptcy can help you manage your joint debts, eliminate unsecured debt, and prevent creditors from pursuing you for payments.

If you’re facing joint debt after a divorce and are considering bankruptcy, it’s important to consult with an experienced bankruptcy attorney in California from Winterbotham Parham Teeple, a PC. A qualified attorney can help you understand your options, navigate the bankruptcy process, and ensure that your financial future is protected.

If you’re dealing with joint debts after divorce, contact an experienced bankruptcy attorney in California for a consultation by calling 800.400.9000 and explore your options today!