Questions About Bankruptcy?
| Questions About Bankruptcy? |
Bankruptcy and Divorce
How will divorce affect my bankruptcy? Can I still file?
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How will my bankruptcy affect my divorce?
Bankruptcy and spouses in Washington State
Washington is what is known as a “community property” state. That means any property acquired during the marriage automatically belongs to both spouses. In addition, any debt acquired during the marriage belongs to both spouses.
For that reason, it is usually best for a married couple to file bankruptcy together in Washington because even if one spouse did not take out a loan, he or she will probably be liable for the debt anyway. Other community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas and Wisconsin (and Puerto Rico).
One issue married couples face is that their income must both be included in the statement of income. This is even true if only once spouse files the case. Including both incomes can make two people with fairly modest incomes suddenly seem well off in the eyes of the bankruptcy court.
It is important to talk to an attorney in this situation. Our Everett bankruptcy lawyers are experienced at dealing with this situation and will fully explore your unique situation to make sure you are not being treated unfairly.
If you are considering getting married and have a lot of debt, you may wish to file a bankruptcy before getting married. You would not want your spouse to have to deal with a crushing amount of debt sapping money out of your household budget, especially if you are not making any progress on the loans. However, if both you and your future spouse have a lot of debt, it may be beneficial to wait to get married and file together.
When married couples file a case together, it is called a “joint case”. Only legally married couples can file a joint case. Among the advantages of a joint case is that the courts can administer everything at once and get a good idea of the big picture. You can still file a joint case even if you are separated. Filing a joint case will save on attorney’s fees and filing fees as well.
If a couple is planning on getting a divorce and are also considering bankruptcy, the question is whether they should file a joint case then get a divorce, or finalize the divorce and file two separate cases. By filing a joint case before divorcing, people can eliminate a big issue in the divorce – who will pay this debt?
This issue is especially important because, if one party is ordered to pay debt in a divorce decree, the other spouse may be able to sue if they end up paying the debt instead, even if the debt to the creditor was discharged in bankruptcy. If you are in this situation, you should tell your divorce attorney (if you have one) that you are considering bankruptcy.
There could be a conflict of interest between a divorcing couple. For instance, if one makes a lot more money than the other, one spouse may have to file a Chapter 13 repayment plan while the other could file a Chapter 7.
Other conflicts could arise. If the conflicts are too serious to deal with fairly, then the couple should get two different attorneys. Otherwise, you may need to give your permission to your attorney to represent both of you after being fully advised of the possible conflicts.
Divorce is a big cause of bankruptcies. Our Everett bankruptcy lawyers have helped countless people in that difficult situation with understanding and compassion. Of course, we also represent countless married couples.
If you are married and are thinking of filing bankruptcy, we would love to meet with you to discuss how exercising your right to a fresh start in bankruptcy will help you build your dreams for your family instead of spinning your wheels for years to come.