Many bankruptcy clients come to us before or after a divorce. Or even during a divorce. We assist them in making various decisions, including which to do first. The key is what the client is trying to achieve. It is critical that potential bankruptcy clients speak to an experienced attorney before they “figure out” which to do first.
The following are some ruminations regarding the bankruptcy and divorce conundrum. One rule of thumb is to know that no matter what you legitimately discharge in the bankruptcy, you can’t discharge your obligations to your former spouse and children. For example, if you are both on the mortgage, you file bankruptcy and you think you are no longer obligated on the mortgage, you may be right…with respect to the lender. But if the Massachusetts Family and Probate Court has ordered you to pay the mortgage so your former spouse can stay in the home, you are not off the hook with respect to your obligations there.
Credit cards. Those that are in your name can usually be discharged. But, like a mortgage, if your former spouse is also on the card, there may be a consequence in the Probate and Family Court with respect to paying off credit card debts. Nevertheless, look carefully, often cards you think are in one name are in both.
Filing Bankruptcy With Your Divorcing Spouse
Filing bankruptcy together? If you are on good terms, and are still married, this can be done. Sometimes, it helps immensely with the divorce. It also can be complicated. Can one lawyer represent both? Will you continue to cooperate? Are you willing to open up all of your financial records before preparing for a divorce?
Often, this happens when the parties are “separated” but still living under one roof. They are working through things. A fresh start from personal bankruptcy
Bankruptcy, Divorce and Defaulting on the Mortgage
We haven’t looked, but perhaps this is a good title for a book. The short answer is: seek professional help. Meet with an experienced bankruptcy attorney. If both parties agree to vacate and allow a home to go into foreclosure, that could be helpful in bankruptcy. If, on the other hand, one spouse remains in the house, a whole host of problems can occur if everything is not worked out. For example, in Massachusetts, under General Laws, Chapter 244, a foreclosing lender can only pursue a deficiency if they give proper notice prior to a foreclosure that the lender intends to pursue a deficiency following the foreclosure.
So, Divorce or Bankruptcy First?
In a divorce, you are entitled to “discovery” which may assist you in understanding what assets are actually are. Thus, if there are any questions, this route would be helpful. Most folks coming to us for a bankruptcy, pretty much know their assets. And they are limited. On the other hand, sometimes a divorce will bring out debts that clients did not know they had. Mortgages or other loans that the partner took out, perhaps in both names, are important to know about and understand before filing for bankruptcy.
Answer: Call an experienced bankruptcy attorney. Get representation. You need someone on your side. The bankruptcy law can be helpful.