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Declaring bankruptcy after divorce

Getting into debt can set you back years. Once you fall behind, you may get late fees and a black mark on your credit score.

Money stress is one of the leading contributors to Tennessee divorces. Thus, those deep in debt may find themselves in court dividing up assets, time with children and debt. After divorce, paying these bills may become even harder with one income. Bankruptcy may prove the best route for those mired in debt after a divorce. Explore the way bankruptcy may help you get a fresh start.

If you hold assets

One way to file bankruptcy, Chapter 7, involves liquidating assets to pay creditors. A court-appointed trustee determines the number of assets you can liquidate and put toward debt. If you came through your divorce with property, you may have to sell it or surrender it to the lienholder, if one exists. In many states, you can keep a primary residence and a car, even if they are not paid off.

If you do not have many assets

Chapter 13 is a payment plan. The trustee works with creditors to reach a reasonable monthly amount that you pay over three to five years. If you fulfill the terms of your payment plan for the requisite time, the court discharges the remaining debt.

If you still hold joint debt

One of the hang-ups for divorcees is joint debt. While divorce typically separates obligations, there are times when it is not possible. When a couple refinances or consolidates two separate debts into one, they may remain that way until paid. If you try to include any joint debt in your bankruptcy, your former spouse may get a notice that he or she is responsible for the entire amount. You may find yourself in civil court if you violate the terms of your divorce decree in this way. Therefore, you may have to omit joint debts the bankruptcy filing.

Speaking to an attorney about how to traverse bankruptcy in any situation is best. After a divorce, with emotions and tensions just cooling off, you may want further legal advice on how it will affect your former spouse.

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