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Reason five: Bankruptcy and divorce law frequently come into play during the course of a divorce case.
Divorce lawyers generally advise divorce first and then file bankruptcy. The reasoning is while a bankruptcy court may discharge a spouse's debt to a creditor, the divorce judge may later order that same debt paid despite bankruptcy. The typical example includes the following: husband and wife have borrowed money from the wife's parents, then the husband files bankruptcy and includes the debt to her parents. In a later divorce, the wife's successfully argues to the divorce judge that since the borrowed money from her parents was used for marital purposes that debt to her parents remains unpaid, and she is remains responsible for the debt. Therefore, the husband should also pay that debt despite his bankruptcy. The divorce judge may well agree and order the husband to pay the debt despite his bankruptcy.
Another example of where bankruptcy law and divorce law intersect is if you're ordered to pay your spouses divorce attorneys fees, and then you later file a bankruptcy, those attorneys fees may be found to be nondischargeable by the bankruptcy court. You still owe them bankruptcy or not. Although your have gone bankrupt you must still pay the divorce attorneys fees. Likewise, if you're ordered to pay attorneys fees for a Guardian ad Litem (GAL) in a child custody case arising during your divorce, these GAL fees are also nondischargeable in bankruptcy.
Sometimes bankruptcy should be filed before divorce. Bankruptcy can keep one spouse from being held responsible for bulk of the marital debt created during the course of the marriage. For example, if one spouse makes the majority of the money in the marriage, during divorce the divorce court may order that spouse to pay the major part of the marital debt (even so far as paying the entire debt.) Such a spouse would be wise to have both spouses file a joint bankruptcy eliminating all of the debt and preventing one party from being responsible for a heavy burden of debt.
There are other times where both spouses may want to file bankruptcy prior to divorce. A joint bankruptcy filed by both spouses can be used to eliminate debts such as credit cards, mortgage debts left over after a foreclosure, and other debts that arose during the marriage. Thus, the husband and wife get a fresh start.
Knowing when to file for bankruptcy and when to file for divorce is crucial to creating a plan for your future following a divorce. Timing of bankruptcy and divorce may be the most important factor in a successful life after divorce. Think financially not emotionally during a divorce. Our divorce lawyers at Martoccio & Martoccio are highly skilled in the interplay between bankruptcy and divorce. Sound economic advice is what good divorce lawyers do best.