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Divorce And Bankruptcy

Divorce usually brings with it financial changes, some of which can lead one or both spouses into bankruptcy. While spouses after divorce can find themselves facing new bills and responsibilities that can lead to having to file for bankruptcy, in some cases, the road to bankruptcy can begin with the marital debts and a spouse refusing to pay his share.

When a couple divorces in Florida, the couple’s marital assets and debts are divided equitably amongst the spouses. Sometimes this division is by negotiation between the spouses. One spouse may end up responsible for paying a debt that was acquired by both spouses during the marriage. However, even when a court orders one spouse to pay a joint debt, the creditor does not necessarily release the other spouse from the debt.

Creditors are not parties to divorce actions, and they do not have to recognize the division of debts as ordered by the court. Therefore, when the spouse who is ordered to pay a joint debt in a divorce refuses to pay the debt, the creditor can pursue both spouses for the balance owed.

Sometimes, the spouse who is ordered to pay a debt may either choose to ignore the debt, or fall on hard times and become legitimately unable to pay the debt. If the spouse is unable to pay the debt, along with all his other debts, he may file for bankruptcy to erase the debts. If the spouse files for bankruptcy and gets legally released from a joint debt, the creditor generally pursues the only other person left on the debt.

If the creditor seeks payment from a spouse who was supposed to be released of the debt in the divorce, the spouse can either pay the debt, seek enforcement of the divorce decree requiring the other spouse to pay the debt, or file for bankruptcy to be cleared of the debt. Filing for bankruptcy is not always an option, especially for some people in certain fields where filing for bankruptcy can be a costly career move.

Some ways to avoid the issues that arise with debt in divorce is for the parties to either pay off as many debts as they can before the divorce or to refinance the debt to remove each spouse’s name from a debt the spouse will be excused from. This generally happens with mortgage debt. When one spouse is awarded the matrimonial home in the divorce, the spouses refinance the mortgage to remove the spouse who will no longer own the home from the mortgage loan. If joint debt is refinanced to only bear the name of one spouse, creditors can no longer pursue the debt from the released spouse, even if the spouse responsible for the debt files for bankruptcy.

Contact Us for Legal Assistance

If you are going through an amicable divorce with your spouse, there can be better ways to handle the debt that is acquired in your marriage. However, before negotiating and agreeing to take on to debt in exchange for a larger share of marital assets or other compensation, you need to consult with an experienced divorce attorney to ensure any agreement is in your best interests. To schedule a meeting with our compassionate and experienced Boca Raton, Florida divorce attorneys, contact us at the Law Offices of Schwartz l White.



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