Dealing with Divorce or Death After Filing Bankruptcy

Financial hardships are hard enough for couples that are happily married. And financial hardships often strain marriages to their breaking point. The pressure and stress that result from a loss of income, severe debts, or a combination of the two can also be exacerbated exponentially should one’s spouse pass away.

It’s already difficult to deal with the emotional and psychological fallout from a separation or the grief of a significant other’s passing. Having to address the harsh reality of shared financial issues—some of which can be quite intensive and complex—in the aftermath of either of those circumstances is not easy.

Bankruptcy brings about its own unique legal challenges and idiosyncrasies. Here are some things to look out for in these delicate, involved, and oftentimes grave situations.

Dealing with Divorce and Bankruptcy

The unpredictability of life gets in the way of even the best thought-out plans, but it is more beneficial for both partners to file for bankruptcy before filing for divorce. While it is certainly true that the timing of these events cannot be orchestrated or executed to a tee, the consequences of a filing for bankruptcy before or after an official separation can vary greatly.

When financial terms are worked out jointly, it structures and simplifies any future dealings with finances. After a married couple is separated, a one-sided bankruptcy filing will still affect the other spouse — this time on conditions in which they did not agree upon or were even privy to.

There have been many instances in which a spouse that has filed bankruptcy after divorce causes the other spouse to have financial problems as a result. There is also the communication factor – if the formerly married parties are not on speaking terms, it makes things even more difficult to efficiently come to a mutual resolution.

Two Important Things to Consider

1. Mutual debts incurred during the marriage remain so even after the divorce.

Even though the specifics of who pays what debts can often be settled between the two divorcing parties during the proceedings, those agreements do not extend beyond the former husband and wife.

Creditors are in no way tied to these agreements and can go after either one of the spouses when chasing payments. Non-payment by one former spouse can mean incessant calls from collection agencies and even potential legal problems for the other.

2. You cannot avoid alimony or child support by declaring bankruptcy.

Alimony and child support payments – which are court-ordered financial obligations to a former spouse and/or children – play no part in bankruptcy proceedings.

Just because an ex-husband or ex-wife files for bankruptcy after alimony or child support terms are set, their responsibility to make those payments is not affected – they are still completely liable and nothing that happens in bankruptcy court can change this.

Dealing with Death and Bankruptcy

The death of a spouse is a traumatic experience even if it was knowingly expected due to a terminal illness or other problem, particularly if the couple had filed bankruptcy or was in the midst of the process. It is a harsh but necessary reality to be forced into life-altering financial decisions in the wake of personal upheaval.

Three Important Things to Consider:

1. You do not necessarily inherit your spouse’s debt after they die.

It is always best to contact a bankruptcy attorney for the specifics of dealing with a deceased spouse’s bankruptcy plan payments or debt situation. But in most cases the debt does not directly fall onto the surviving spouse. If creditors are contacting you specifically for payment in lieu of your late husband/wife, it is wise to do some research before paying it.

2. In cases of community property, bankruptcy can affect the debtor’s spouse.

Community property is property acquired during the marriage and deemed to be jointly owned if or when a couple divorces or annuls their marriage. If a spouse dies, and creditors through bankruptcy go after the debtor’s estate—which includes the community property—the debtor’s spouse can lose what is his or hers if it is technically included in said community property.

This is true in non-bereavement situations as well.

3. Some creditors might try to collect on a deceased spouse’s death, whether it is legal or not.

This fact is an unsavory truth about debt collecting. Creditors will often go above and beyond what is ethical – and even push legal boundaries – to get what is theirs. Almost comparable to a mischievous child that will simply push and push until they are told by a legal authority not to, many creditors have no shame.

Sadly, there is also potential for outright scam artists to try and take advantage of the surviving spouse in these situations.

Clarify Everything

Always remember: if a bankruptcy debt falls exclusively onto someone after divorce or the loss of their spouse, it is in their best interest to re-acclimate with the details before making a decision on how to proceed to the next step. A spouse should never leave any bit of information uncovered.

Although both print and online publications offer a wide range of advice and indispensable facts, professional counsel from an attorney specializing in bankruptcy law who can provide a wealth of – correct –information is recommended. This can help a person properly get through the inner workings of bankruptcy after either a divorce or a death.

This article was written by the ElliotSavitz.com, a Massachusetts Criminal Defense attorney.

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