Divorce and bankruptcy often go hand-and-hand for North Carolina residents.
Financial problems often contribute to breakup of marriages or, at least, are in the mix when a couple’s relationship is on the rocks.
On the other side of the coin, divorce creates a huge financial burden on both spouses, as each of them could lose approximately half of their wealth and will also lose a valuable source of financial support.
One spouse may also be responsible to pay child support or alimony, which may also be referred to as spousal maintenance.
Filing bankruptcy before divorce
Some couples who are in financial distress may choose to seek help with filing for a bankruptcy before divorce. There are some possible financial advantages to doing so.
For example, from a bankruptcy perspective, filing as a married couple may mean that it is easier to qualify for filing a Chapter 7 bankruptcy is opposed to having to set up a five-year payment plan in a Chapter 13.
A married couple may also be able to protect more of their property from sale while still eliminating most if not all of their individual and joint debts.
It’s not the best option for everyone, but a well-timed joint bankruptcy petition can ensure that a couple which is going separate ways will be able to do so with a fresh financial start.
Bankruptcy after a divorce order has been entered
In other cases, someone who is already subject to a divorce order may wish to file bankruptcy on their own. Doing so may not be a major issue if one’s former spouse agrees with this decision, but such an agreement is not possible in every situation.
Before going forward, it is important for a Durham resident who is divorced and has financial problems to understand what bankruptcy can and cannot do for her.
Bankruptcy can go a long way in helping a newly divorced person get her financial affairs in order, but it does have some limitations when it comes to certain divorce-related debts.
For instance, a bankruptcy generally will not allow a person to discharge his child support obligations. He will have to pay those in full. Likewise, alimony, by whatever term it is called, is not dischargeable.
Finally, even debts related to property settlement, like equalization payments and the like, may or may not dischargeable depending on each spouse’s financial circumstances and other factors.