While divorce is an emotionally trying time, it is also tough on your finances. After a divorce, many folks are left to deal with debts that, while they were married, had been easily managed with two incomes to support a family. Bankruptcy is one way for people to get their lives back on track financially, and learning about why divorce and bankruptcy often go hand in hand is an important step in securing a better financial future.
Why divorce often leads to financial strain
The financial system of a family is significantly altered during a divorce, where one family splits into two, and costs that were formerly shared must not be met individually. This often translates to a higher lifestyle cost.
Some of the most common financial issues that arise in a divorce scenario include:
- The costs of maintaining a separate residence
- The costs of legal representation in a divorce
- Debt reassignment between both spouses
- The reduction in family income
- Child or spousal support payments
In spite of a divorce agreement in which debts are re-allocated between both parties, it is often a challenging situation for both parties to make ends meet. This is sometimes so bad that people might end up living off credit cards or loans just to get by. This sometimes spirals out of control into unmanageable debt.
Bankruptcy can provide a fresh start
If you are dealing with divorce, a bankruptcy might prove to be a helpful solution to your problems. Bankruptcy is a legal procedure that aims to help people overcome their debt problems and improve their financial situation.
There are two types of personal bankruptcies: Chapter 7 and Chapter 13.
Under Chapter 7, an individual is allowed to clear debts such as credit card debt, medical bills, and personal loans. This type of bankruptcy provides quick debt relief to people who no longer have the means to pay off their debts.
Under Chapter 13, an individual is allowed to make a repayment plan to pay off debts over a period of three or five years.
For many divorced people, bankruptcy might prove to be a helpful solution to make their lives easier to manage.
Divorce-related debts are treated differently
Why bankruptcy can discharge many types of debt, family law is not always handled in the same way. For instance, child support and maintenance are not dischargeable in bankruptcy.
Further, there are many types of debt that are given out in divorce proceedings that may still be the responsibility of the individual who is supposed to be paying them. As such, there are many legal implications when one decides to file for bankruptcy in relation to their divorce.
There may be instances when one should file for bankruptcy before their divorce, and others where they might file after. Ultimately, it is something to discuss with your bankruptcy attorney while your divorce is ongoing.
Talk to a Danville, IN, Bankruptcy Lawyer Today
Chris Arrington represents the interests of Dansville residents during their divorce. Call our office today to schedule an appointment, and we can begin discussing your next steps right away.