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Written by Chuck Bowen
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Sunday, 17 August 2008 12:00 |
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Hi Chuck,
I'm currently filing for divorce from my husband. He wants to file for
bankruptcy, but I don't. Is it possible to separate debt before
divorce and let him file bankruptcy on his share after the divorce is
final while I continue paying on my share? Or, will his bankruptcy
affect me even after divorce?
~ Marilee in San Antonio, TX
Divorce is a not only a relational nightmare, but a financial one as well. Long after the decree is final, there are scars that may take a very long time -- or perhaps never -- to heal.
I once heard that getting divorced is like both parties leaning out a window and throwing out handfuls of $100 bills into the street. Combined, divorce and bankruptcy is the "financial suicide" of our current culture. Let me give you the lowdown.
First, your creditors will not care -- or be legally affected -- by your divorce. You will still be liable for any debt for which you individually or jointly signed. Regardless of what your divorce decree states, your creditors may choose to pursue you for repayment even if your ex-husband agrees to repay it in full. Likewise, unless your creditors agree to take one of your names off the contract for debt (automobile lien, credit card account, etc) then you both will be responsible for any co-signed debt.
If your husband decides to drop the financial nuclear bomb (bankruptcy), then your creditors can require the full balance repayment from you even if the decree assigns the debt to your ex-husband.
If you feel this is likely, then your divorce decree should clearly spell out any recourse you may have against your ex-husband should he default on any loan obligations.
Just so you're thinking clearly, here are a few final thoughts:
- Be sure to contact all current creditors immediately and close your joint accounts to any further charges. This will help ensure he doesn't charge up the accounts prior to your divorce (you won't be responsible for anything incurred after the divorce is final). FYI, your ex-husband will not need your signature to file his bankruptcy on joint debt.
- Request your creditors remove your name from the joint account. If they agree, this is a good sign that they would not hold you liable for repayment -- most likely since they don't have your guarantor signature on file.
- Demand in your divorce decree that all joint debt for which he will be responsible be paid off or refinanced into his name. This is SO important! If the debt can't be paid or refinanced, you may be able to denote clearly in the decree what may be non-dischargeable in bankruptcy or state court.
Regardless Marilee, I highly recommend you seek expert legal advice. Now is the time to begin protecting yourself as well as possible.
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Comments
I'm saddened to hear of your divorce. I'm sure it is hard for you, both emotionally and financially.
If you file bankruptcy for the cards you jointly signed for, it will not affect his credit since people file bankruptcy individually. However, if he continues to default and doesn't file bankruptcy he is liable to the creditors for his debt. You will be absolved if you file and approved for Ch. 7; if you file for Ch 13 (structured repayment), the bankruptcy trustee will decide how much of the balances you'll be required to pay.
Re: your joint mortgage, your ability to save your home depends on a few things. If he defaults, you'll have to bring it current with the bank to save it. If you file bankruptcy you'll need to re-affirm your home so the trustee may decide to allow you to save it. If you don't file bankruptcy, then it's between you and the bank to work out your purchase arrangement. It will be foreclosed unless the bank is paid (brought current) in some fashion.
Hope this helps, and things turn out well for you both.
Chuck
Also... Our joint mortgage on our home was not payed off, however, he was awarded the home. If he defaults on the mortgage loan, will I have a chance to get the house back from the bank or will it automatically be forclosed?
Thank You
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