How Does Bankruptcy Affect Divorce in Texas?

 Posted on November 05, 2024 in Bankruptcy And Divorce

Bankruptcy and divorce are two life events that can have major impacts on your finances. Depending on your timing, filing bankruptcy can affect divorce. One of the main reasons for this is that bankruptcy is designed to pull you out of debt while divorce can burden you with more. The debt division part of the divorce process, for example — where the court distributes marital debt between the parties — can be affected by bankruptcy.

If you are considering bankruptcy while also facing a divorce, it is important to understand how the two can intersect. It is also crucial to realize that your timing in filing bankruptcy can impact the divorce process. Consult a Texas bankruptcy attorney for more details and legal assistance with your bankruptcy.

When Should I File Bankruptcy if I Am Facing a Divorce?

There are two options when planning bankruptcy around divorce:

• Filing for bankruptcy before divorce: Filing for bankruptcy first can have advantages, especially if you and your spouse file jointly. If you both liquidate your assets to discharge your debts through Chapter 7 bankruptcy, for example, it can make the divorce process smoother by avoiding complex procedures like asset and debt division. On the other hand, your divorce usually cannot be finalized while bankruptcy proceedings are ongoing, and that may delay the divorce process.

Keep in mind that if both spouses jointly file for bankruptcy, they may not qualify to file for Chapter 7 given their joint assets.

• Filing for bankruptcy after divorce: If you file for bankruptcy after your divorce is finalized, it generally means you will not be filing jointly. In this case, you are more likely to pass the means test required to qualify for Chapter 7 bankruptcy and you may be able to discharge some of the debt that was assigned to you during the divorce.

How Does Bankruptcy Affect Family Maintenance?

In a divorce, one of the parties is sometimes ordered to pay family maintenance, an umbrella term that includes child support and spousal maintenance (also known as alimony). As a rule, family maintenance is not affected by bankruptcy. Whether you file Chapter 7 or Chapter 13, alimony and child support are not discharged and must be paid for the duration of the court order.

How Does Marital Debt Division Work During Bankruptcy?

Part of the divorce process is debt division, where a court assigns marital debt to each party. Marital debt refers to financial obligations incurred during the marriage that benefit both parties. These may include:

• Credit card debt

• Mortgages

• Car loans

If you filed for bankruptcy before the divorce, it is not likely to affect the marital debt assigned to you. If you file for bankruptcy after divorce, however — especially if you file for Chapter 7 — it can minimize some of your debt. Creditors may still be able to pursue your ex-spouse for the debt.

Contact a Kerrville, TX Bankruptcy Attorney

The intersection between bankruptcy and divorce can be complex, depending on the type of bankruptcy and the timing of the filing. Consult the Law Offices of Chance M. McGhee about how to proceed with bankruptcy and divorce. We have extensive experience in bankruptcy law and are committed to guiding you through each step of the bankruptcy process. Schedule a free consultation with a Boerne, TX bankruptcy lawyer by calling 210-342-3400 today.