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Debt, Divorce & Bankruptcy

It is no secret that money problems have led to countless divorces. After all, many marriages buckle under the strain of extended unemployment, foreclosures, evictions, and repossessions. That being said, divorce and bankruptcy frequently go hand-in-hand.

If you’re getting a divorce and you and your spouse have a lot of debt, you’re going to have questions about how to tackle the situation. Should you file for bankruptcy before the divorce is over? Should you try to make good on the payments, even years after the divorce? Should you just let the debt slide, and let your credit be ruined for years to come?

Factors to Start Considering

We do not have a blanket answer for every divorcing couple because each situation is different. Often, the best option is to file a Chapter 7 bankruptcy before the divorce is over. This way, the spouses can start the second chapter of their lives debt-free.

However, sometimes a divorcing couple earns too much money (together) and they only qualify for a Chapter 13, which would lock them into a repayment plan for 3 to 5 years. In these situations, the spouses may be better off divorcing, and then filing Chapter 7 individually after the divorce is over – that is if their post-divorce income qualifies (is low enough) for a Chapter 7.

Marital Debt Follows You After Divorce

Regardless of what you decide to do, it’s important that you know that California is a community property state. As a community property state, all marital assets and debts acquired during the marriage belong to both spouses equally.

So, even if your spouse agrees to pay a certain debt, such as their auto loan (that your name is on too), and they fail to pay their car payments for any reason, the lender can go after you for the balance.

Creditors are not parties to divorce decrees, so as long as a debt was acquired during the course of your marriage, you’re on the hook for it if your spouse has difficulty paying it, even if your divorce has been final for years – another good reason to consider bankruptcy.

If you’re headed for divorce, contact Nguyen Law Group to speak with a Rancho Cucamonga bankruptcy lawyer for free. We can help you decide if and when you should file bankruptcy.