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The potential interplay of a divorce and a bankruptcy

Married couples in South Carolina often decide to seek a divorce when there seems no way out of mounting financial problems, and some unhappy spouses looking for a fresh start also decide to file for bankruptcy. While both bankruptcy and divorce offer an escape from unmanageable situations, the decision about which to pursue first should be made carefully.

Those with spouses who earn a significant income may be wise to wait until their divorce is final before filing for Chapter 7 bankruptcy. The means test for Chapter 7 bankruptcy filings is strictly adhered to, and the earnings of both spouses are taken into consideration if a joint bankruptcy petition is filed. It may also be prudent to seek a divorce before filing for bankruptcy when one spouse has a large amount of non-marital assets. Property owned prior to a marriage or received as a gift or an inheritance during a marriage is not generally divided during a divorce, but it may prevent a bankruptcy filed prior to a divorce from being discharged.

Timing is an important factor for divorcing spouses who are eager to move on with their lives, but assets that are part of a bankruptcy estate cannot usually be divided as part of a divorce agreement. This can lead to frustration as divorces drag on and cannot be finalized until the bankruptcy is discharged or a judge decides that an exemption is warranted. However, spouses may choose to file a bankruptcy before a divorce to prevent them being held responsible in the future for the debts of their former husband or wife.

Experienced bankruptcy attorneys may discuss these factors with spouses considering both a divorce and a bankruptcy during an initial consultation. Attorneys may also explain the merits of the different debt relief options available and how they would impact a divorce filing.

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The Huggins Law Firm, PA

Columbia Office
1812 Lincoln Street
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Columbia, SC 29201

Phone: 803-764-1558
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