A common problem after a divorce is the family court’s order concerning joint debt.  The order will typically direct one party to pay or refinance a joint debt.  Many are surprised to learn that this order does not relieve a parties’ obligation to pay the debt.  The simple explanation is that the family court judge does not have the authority to rewrite a contract between you, your spouse, and a creditor who is not a party to your divorce.  If your spouse does not pay the joint debt, your credit may be harmed.  

On the other hand, by filing a bankruptcy prior to the divorce, most joint debts can be legally and finally terminated either by payment or discharge.  Additionally, by resolving many of your outstanding debts, it is easier to negotiate the remaining obligations between you and your spouse. 

Married couples also enjoy protections in bankruptcy that single debtors do not receive.  For instance, married couples often receive increased legal exemptions that protect property from creditor attachment.  These exemptions may be lessened or no longer available once the divorce is finalized.  In other words, what you could protect in bankruptcy while married may not be protected after a divorce. 

To say that the interplay between the state family laws and the federal bankruptcy laws is complex is a gross understatement.  However, many of these complexities can be avoided by filing a bankruptcy ahead of a divorce.  In some cases, the couple decides to stay together after the financial strain is removed by the bankruptcy. 

If you and your spouse are considering divorce, consult with an experienced bankruptcy attorney and have your finances examined.  If bankruptcy is a possibility, it is generally better to proceed with the bankruptcy case prior to the divorce.