Our Moreno Valley consumer bankruptcy attorneys were interested to see a recent Q&A column about the effects of divorce on a bankruptcy. Bankrate.com ran the column Dec. 8 with a question from a woman who shares ownership of her former home with her ex-husband, who still lives there. The home is for sale, but in the bad market, they have not been able to find a buyer. The ex-husband is in financial trouble and can't pay the mortgage, she said. If the lender moves to take the home, the ex-husband wants to declare bankruptcy. She wants to know if her ex can put the entire home in bankruptcy even though he only owns half, whether she must cooperate and whether it would help to take his name off the deed to the house.
Unfortunately, the columnist had bad news for this woman. Former spouses can file for bankruptcy without consent or participation from their exes, even when ex-spouses share property or children in common. Once a bankruptcy is filed, a trustee will look at all of the ex-husband's assets, just as they would in any case. Those assets will include his half of the interest in the house. If the ex-spouses have little or no equity in the house, the trustee won't have anything to recover and will probably not try to sell the house. But if they do have equity, there will likely be a sale and both exes will be compensated for their shares. Furthermore, depending on the state, the woman would be liable for any deficiency balance if the home is sold through a short sale, whereas her ex would be protected by his bankruptcy. However, this may not be true if he was given responsibility for the mortgage in the divorce decree.
As you can see, much of the issues surrounding bankruptcy and divorce depend on the terms of their divorces. As Downey personal bankruptcy lawyers, we prefer to look through each individual's own financial situation and divorce decree, because it's difficult to generalize. However, one important fact about divorce and bankruptcy is that the debts you take on in a divorce often aren't dischargeable in bankruptcy. For one thing, child support and spousal support (alimony) are not dischargeable and in fact given top priority among creditors, although people who are owed support should file with the court to show they are owed. For another, the 2005 bankruptcy law changes made it harder to discharge debts related to property settlements. In a Chapter 7 bankruptcy, you are still responsible for those debts if not paying them would harm your ex-spouse more than it would harm you. In Chapter 13, this is easier.
Howard Law PC handles these and many other complicated legal issues as part of our bankruptcy law practice. Our Seal Beach individual bankruptcy attorneys know bankruptcy is not the best choice for everyone, so we start each case by sitting down and thoroughly reviewing the client's finances, debts and obligations. In addition to helping us find alternatives to bankruptcy for people who can use them, this helps us determine which type of bankruptcy best meets your financial and personal needs. Then, we stand by our clients throughout every step of the process, including the sometimes tricky process of documenting all of their debts and assets. Once the bankruptcy is filed, we can defend clients against overreaching creditors, illegal debt collection and honest mistakes that can get the case canceled.
If you're considering bankruptcy as a way to get out of overwhelming debt or an unreasonable mortgage, you should talk to Howard Law right away. To learn more or set up a free consultation, send us an email or call toll-free at 1-800-872-5925.