Answer

Bankruptcy during divorce can be very tricky. If you have a lawyer, it would be wise to address this issue with them immediately. Not all family law lawyers do bankruptcy work, but if they are doing divorces they should have a very good understanding of how a bankruptcy can effect you and the divorce procedure.

There are several obligations that can not typically be discharged by bankruptcy, and they are:

- Alimony, spousal support, and maintenance.

- Child support.

- Attorney's fees connected with the divorce.

- Agreements to pay marital debts in exchange for a lower support payments.

- Debts paid in installments over a long period of time.

- Debts owed to a spouse as a result of a property division.

- Debts owed due to costs associated with the divorce.

Whether or not all of the above remain non-dischargeable depends on whether or not you are willing to contest the discharges in court. Also a carefully crafted marital separation or settlement agreement is a must. There should be a clause that is carefully written to protect you if your spouse does or did file for bankruptcy. Please keep in mind that it is very difficult, if not impossible to successfully file for bankruptcy while a divorce is also being filed. One typically come before the other.

There are two types of bankruptcy. Chapter 7 bankruptcy, which is one in which all the debt is erased and chapter 13, which is one in while a financial reorganization takes place. If you spouse has or plans to file for chapter 7, you are at a greater risk to suffer the financial consequences.

Your credit can certainly suffer from the bankruptcy because your name is on the loans and mortgage. The lenders will most likely come after you for the debt, depending on what type of bankruptcy your souse files, he or she may be protected from the collection of the debt. If you do not want to participate in the bankruptcy as well, you may be battling the lenders. There are steps and procedures to protect you against the portion your spouse is responsible for, but it requires the filing of paperwork and providing proof to the lenders with your divorce decree or judgment that you are not responsible for the specific debts as granted by the court.

If you want to find out if your spouse has filed for bankruptcy, try contacting your local county court house, and if you have an attorney, he or she should be able to retrieve this information rather quickly.

Although a particular marriage may be coming to an end as a result of divorce, unfortunately, the same cannot be said for any and all debts and/or credit obligations accumulated during that marriage. While there are many uncertainties connected with the entire divorce process, one element can be counted on to remain constant - the monthly bills. Therefore, from the moment the decision to separate is made, it is very important to understand the effects this will have on your debts and credit rating.

A person's credit history is very important as it is a major means by which a particular creditor can judge whether or not you are a good risk for a loan or credit line. Your history reflects what you have done with previous loans/credit lines and your willingness to repay borrowed monies. This factor and your current income are what determine what is known as your "credit worthiness". It is your credit worthiness that will ultimately decide whether or not you will be granted the loan or line of credit you apply for.

Getting Help With Credit Problems or Questions

The Consumer Credit Counseling Service is a non-profit organization dedicated to helping people understand, prevent, and solve credit issues. For people with severe troubles, there is a Debt Management Program through CCCS which can help to manage and repay debts by restructuring your budget and negotiating on your behalf with creditors. There are more than 1,000 CCCS offices throughout the United States, Puerto Rico, and Canada providing low-cost or even free services. It is their policy to turn their back on no one, regardless of ability to pay. To contact the nearest location, refer to the local telephone book or phone (800) 388-CCCS.

ON-LINE RESOURCES:

Frequently Asked Bankruptcy Questions
http://www.divorcenet.com/credit/bankrupt-faq01.html

Divorce and Bankruptcy: Complete Overview
http://www.divorceinfo.com/bkrcybankruptcy.htm

INTERFACE OF FAMILY LAW AND BANKRUPTCY
http://www.divorcesource.com/research/edj/bankruptcy/01feb13.shtml

Credit - Debt Division and Divorce
http://www.divorcesource.com/MN/ARTICLES/beaulier13.html

CASES:

NEW YORK: Sinha v. Sinha, No. 89173, 2001NY.0005490 (N.Y. App. Div. July 12, 2001).
http://www.divorcesource.com/research/edj/bankruptcy/01aug95.shtml
The wife claimed that the husband's claim for equitable distribution of marital property was barred by her discharge in bankruptcy, while the husband asserted that his claim remained viable against certain property that had been declared exempt property in the bankruptcy proceeding.

NEW JERSEY: Frankel v. Frankel, 274 N.J. Super. 585, 644 A.2d 1132 (App. Div. 1994).
http://www.divorcesource.com/research/edj/bankruptcy/94nov127.shtml
Where spouses have resolved all issues by agreement, but a bankruptcy stay prevents entry of a final judgment, the trial court may bifurcate the trial and enter a partial judgment of divorce.

Cases of Interest: Bankruptcy
http://www.divorcesource.com/research/edj/cases/bankruptcy.shtml

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