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How to Handle Bankruptcy After Divorce?


How to Handle Bankruptcy After Divorce?

Once you decide to end your relationship with your spouse, you must file for divorce. The divorce process can be traumatic, chaotic, and stressful, especially if bankruptcy is added. 

Divorce and bankruptcy are two of the most stressful and emotionally challenging experiences a person can go through, and coping with both at once is daunting, but this post can help you understand what to do if you find yourself in this situation.

In this post, we will see how to handle bankruptcy after divorce.

Do Bankruptcy and Divorce Affect Each Other?

If you and your spouse decide that a divorce is the best option for you, then your finances are impacted by the process and may lead you to file for bankruptcy.

When a couple finds that they must repay a significant amount of joint debt with their income, then a divorce damages the financial status of both spouses.

A divorce will increase each spouse’s liabilities by reducing their income. When the divorce takes a long time, then one of the spouses may not meet their obligations during the divorce, which will affect how the courts divide jointly acquired property and debts.

During the divorce proceedings, the court might order one of the spouses to pay alimony, living expenses, or both. If your spouse fails to pay this amount, then it may result in not just disrespect for your spouse, but may lead to interest-bearing debts that must be paid off after a period of time that can fall on your shoulders.

The couple may file a bankruptcy petition in which they list all of their income, assets, and liabilities and select between discharge and reorganization.

What to know about Credit Card Debt Forgiveness

The discharge option is the faster one. Once the petition is filed and a trustee is appointed, the creditors have an opportunity to speak. From there, the trustee issues a report, which the courts usually accept.

Alimony, legal costs, fines, and temporary expenses of guardians are not paid in connection with the divorce. This explains why filing for bankruptcy makes sense for some couples seeking maximum equity in their distribution.

Chapter 7 bankruptcy is the simpler choice when you and your spouse want a quick divorce. This will pay off all legally permitted debts and leave both spouses with bad credit scores but free of debts.

Chapter 13 bankruptcy will take longer. It might be five years or more, which is a long time for the couple to settle. 

Is it Good to File for Bankruptcy After Divorce?

Many divorce survivors experience financial problems and this is the solution may be to file for bankruptcy.

You may have a hard time paying the bills with one income or of any home support tasks.

Some couples believe that filing for bankruptcy can eliminate spouse or child support payments, but this domestic debt is not subject to bankruptcy.

When you file for Chapter 13 bankruptcy, you may receive late alimony or child support payments because Chapter 13 bankruptcy is a repayment plan which lasts from three to five years.

In Chapter 13 bankruptcy, some kinds of debts are not dischargeable, so these debts are paid in the full amount.

Depending on your income after divorce, you might be eligible for Chapter 7 bankruptcy. You and your spouse must discuss filing for bankruptcy before the divorce, but due to your income, you may have been disqualified for Chapter 7 bankruptcy. 

So, due to your income reasons, you should avoid facing bankruptcy and divorce at the same time.

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Marital Settlement Agreements and Bankruptcy

The divorce settlement is affected when either spouse files for bankruptcy. You may wonder who has to pay for the joint debt if any one of the spouses files for bankruptcy. 

When you file for bankruptcy, bankruptcy estate gets created and generates an automatic stay. The automatic stay will not affect your divorce but affects the bankruptcy estate property which includes non-exempt property.

If you or your spouse signs the divorce agreement, then you or they are a creditor in a bankruptcy case. So, in that case, you or your spouse need to file for bankruptcy to protect your respective rights.

The timing of a divorce settlement can make a difference as to how bankruptcy will affect you.

Domestic Support Obligation (DSO) is not subject to discharge if it is included in a premarital or divorce agreement, estate agreement, court order, separation agreement, or other governmental authority and is not assigned to an agency other than debt collection.

In case of any further bankruptcy proceedings, the DSO protects the spouse or any future children from discharges.

Consult a Divorce Lawyer

You might have various reasons to file for bankruptcy and divorce, but it is important to discuss with a bankruptcy attorney and a divorce lawyer.

They will give you suggestions by looking at your circumstances and help you decide which should be filed first.

However, both divorce and bankruptcy are very detailed and complex processes and should not be performed without an experienced divorce lawyer and bankruptcy attorney.

It is not good to file for both at the same time, because it leads to more financial stress.

Remember that you and your spouse cannot hire the same divorce lawyer or bankruptcy attorney. Lawyers cannot represent both of you at the same time and are legally incapable of doing so.


Filing for bankruptcy will cause an automatic suspension of your current finances. No other court can proceed with the distribution of assets, and neither party can access the assets after an account freeze.

Thus, bankruptcy binds the hands of divorce courts and complicates matters of jurisdiction.

Divorce and bankruptcy are opportunities to start a new life for you, your spouse, and your family too, but they must be done with tact and caution. Contact us to know more about your credit report and credit scores.

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Frequently Asked Questions

How soon after a divorce can you file for bankruptcy?

When you file for divorce, let the divorce process finish first and then you may file for bankruptcy. If you file for bankruptcy after divorce, it helps in discharging your debts without depending on your spouse. 

Does bankruptcy clear divorce debt?

The main reason to file for bankruptcy is to clear all your debts by receiving a discharge. If you have any attorney’s fees pending during your divorce process, and you have filed for bankruptcy immediately after divorce, then this divorce debt will be discharged.

What happens when an ex-spouse files for bankruptcy?

If you are a co-signer for any loans or credit card accounts and your ex-spouse files for bankruptcy, then you are responsible for the full amount of those loans. When your ex-spouse files for Chapter 7 bankruptcy and those debts got discharged, then the co-signer is responsible for those debts.

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