Divorce and bankruptcy sometimes go together. Couples in financial straits may also be on the verge of splitting up. Or the costs of a contentious divorce can drain the spouses’ resources to the point that they can no longer meet their credit obligations. Whatever the circumstances, going through bankruptcy and divorce at or near the same time can be stressful and complicated. Jeff Field & Associates is ready to provide the experienced counsel you need.
If one or both spouses file for bankruptcy first, an automatic stay goes into effect that puts a freeze on the filer’s assets and debts. The stay remains in effect throughout the bankruptcy case. If a divorce is filed, the stay will delay the division of the couple’s assets and debts. Conversely, the divorce can affect the outcome of the bankruptcy, since the assets and liabilities of the parties may no longer be considered joint.
Whether bankruptcy or divorce should come first depends largely on the type of bankruptcy you want to file. A Chapter 7 bankruptcy usually is best filed first. Since it takes only a few months and can eliminate many of a couple’s debts, it makes for faster and easier property division during the divorce. However, if your joint income is too high to qualify for Chapter 7, filing for divorce first may be more advantageous. Spouses with higher incomes may be good candidates for Chapter 13, which allows for repayment of debts over a three- to five-year period. However, this can delay property division unless, after divorce is filed, the bankruptcy court approves restructuring the plan as two separate ones. We can advise you on these timing issues and help you decide which path is most advantageous.
Certain debts cannot be discharged in bankruptcy, such as child support and alimony and their related court costs and legal expenses. In fact, the bankruptcy court will not discharge your debts unless you certify that you’re current on your child support payments. Further, the bankruptcy court can lift the stay to allow the filer’s spouse to seek alimony or child support while the bankruptcy case is pending.
The marital home, whether jointly or individually owned, is a major asset that is subject to equitable division between the spouse in a divorce. That division is affected by a pending bankruptcy and particularly by the homestead exemptions available. If the spouses file jointly for bankruptcy, Georgia’s homestead exemption is $43,000, which means the spouses can keep that much of the house’s fair market value and what they owe on the mortgage will be discharged. If only one spouse files for bankruptcy, that spouse can take a $21,500 homestead exemption and get discharged from paying the mortgage, while the other spouse remains liable to pay. The divorce court will adjust equitable division of the home to account for the exemptions taken.
Jeff Field & Associates represents people in bankruptcy cases throughout the Atlanta metropolitan area and beyond. We can advise you on the interplay between bankruptcy and divorce and help you make informed choices. To schedule a debt relief consultation, call 404-381-1278 or contact us online. We have offices in Scottdale, Gainesville, Marietta, Lawrenceville, Douglasville and Athens.
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