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When Los Angeles Bankruptcy and Divorce Intersect

October 6, 2012

Last year, more than 1.4 million people in the U.S. filed for bankruptcy protection.iloveyounot.jpg

Also in 2011, about 1 million couples filed for divorce.

Too often, those figures intersect. Financial woes are often at the root of marital strife, so this is no surprise.

This makes both of these processes more complicated, which means the services of an experienced Los Angeles Chapter 7 bankruptcy attorney, like Vincent Howard of HOWARD LAW, are all the more critical.

Here are some of the possible scenarios you may encounter:

First, if you do decide to file for bankruptcy, understand the child support and alimony payments may not be discharged under the Bankruptcy Abuse Prevention and Consumer Protection Act, signed back in 2005. In fact, these are given priority status over other debts as well. Likewise, your filing for bankruptcy won't affect your ability to collect on support payments from your ex or soon-to-be-ex.

Second, if your divorce is complete, and the divorce agreement requires your spouse to pay half of all the joint credit card debt you owed, you may still get stuck with all of it. If your ex files for Chapter 7 bankruptcy, thereby discharging all debts on his or her part, you will be responsible for it. The unfortunate fact is, creditors don't care what your divorce decree says. They just know that they are owed the balance, they can't go after your ex and your name is on the account. You may have three options in this situation: Either repay all the debt on your own, file your own bankruptcy or sue your ex in civil court. The choice you make will depend on the amount of those debts, relative to your income and other debts. This situation is more common than you think, and illustrates why it's usually advisable to have your attorney insert a clause into the property settlement or divorce judgment that will limit your liability in the event of a bankruptcy.

Understand that filing for divorce prior to bankruptcy does have its advantages. It will allow you to clear up ownership of all property before it becomes a part of the bankruptcy estate. You just need to understand that doing it this way might make it possible to later alter the terms of the divorce settlement to comply with the bankruptcy court. For example, if you receive money or property as part of a divorce settlement within six months after your bankruptcy is discharged, you will likely have to amend your bankruptcy filing to reflect the results of that settlement.

Attempting to go through a divorce while you are simultaneously going through a bankruptcy complicates matters. In many of these cases, it's actually advisable for both soon-to-be-exes to jointly file for bankruptcy together. This may give you both assurances that any joint debt will be discharged, so neither of you will be later stuck holding the bag.

There are numerous ways to protect yourself during the bankruptcy process if you are also considering or going through a divorce. Discuss them first with your bankruptcy attorney.

Los Angeles Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
Divorce: Sue ex over credit card debt? Oct. 4, 2012, By Steve Bucci, Bankrate.com

More Blog Entries:
Credit Card Companies Loathed to Negotiate - Bankruptcy Gives Consumers Upper Hand, Sept. 28, 2012, Los Angeles Bankruptcy Lawyer Blog