Tuesday, November 8, 2011

Effect of Divorce on Bankruptcy in Idaho - Boise Divorce Attorneys - Idaho Bankruptcy Lawyers

What effect does Bankruptcy have on divorce?  As both a Boise Divorce Attorney and an Idaho Bankruptcy Lawyer, I hear this question frequently.  Although there is a fairly simple answer, it is actually a two part question.  First, what happens if you are seeking divorce and have filed or want to file for divorce? 

If you have been in serious financial straights during your marriage filing for bankruptcy might be a sensible solution.  During a marriage your debts are generally community debts with an obligation of the community to pay them.  For a Chapter 7 bankruptcy, if you wait to finalize your divorce (as far as debts are concerned) and file for bankruptcy together, you may be able to discharge a large portion of your debt, thereby making the debt division simpler and less financially straining.  You can also wait until after the divorce to file for bankruptcy but then you will incur a double bankruptcy fee as well as one party or the other may not meet the means test and therefore not be allowed to file for Chapter 7 bankruptcy (the means test takes into account your family size to determine income limits for Chapter 7).

The second question is what happens if neither party files for bankruptcy until after the divorce?  Once you are divorced the community debt that has been assigned to you becomes your separate debt and each individual is obligated to pay that debt and is solely responsible for it.  So, if your ex-spouse files for bankruptcy you don't have to worry about a dischargeable debt becoming your responsibility.  Where bankruptcy after divorce has important issues is for spousal support, or alimony and child support.  Ordinarily a debt is given priority in bankruptcy if it is recorded and once recorded it's priority is based upon "first in time, first in right".  The Bankruptcy Abuse Prevention and Consumer Protection Act of  2005, however, gives priority for unpaid spousal support and child support over all other creditors, even tax debt.  This prevents using bankruptcy from a way of getting out of paying alimony or child support. 

If you have divorce or bankruptcy issues and need to speak to a Boise Divorce Attorney or an Idaho Bankruptcy Lawyer, please give us a call at 208-472-2383 and see what we can do for you.

6 comments:

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