What happens if your ex-spouse files a bankruptcy case? Will it impact you? The answer is “it depends.” It is important to have one of our bankruptcy lawyers review your individual circumstances to help you understand how you might be affected, but below is some general guidance.
As soon as your ex-spouse files his or her Chapter 7 or Chapter 13 case, the automatic stay goes into effect and protects him or her from any collection efforts by creditors. Your ex-spouse will likely be permitted to discharge or eliminate the majority (if not all) of his or her debt – including the debt your ex agree to pay in the divorce agreement. This may result in you being liable for some of the marital debt that was not assigned to you in the divorce order because your name is still on the loan documents. It should also be noted that if your state uses community property laws, it can impact how your ex-spouse’s bankruptcy filing impacts you.
You may be wondering if your divorce decree protects you. The divorce order is a contract between you and your ex-spouse. In other words, your creditors usually are not bound by the terms of the divorce decree, unless your creditor or lender agreed to the terms of it and removed you from liability for the financial obligation Thus, what was owed by you and your ex-spouse prior to the divorce can still be owed by both of you after the divorce, regardless of what the divorce decree provides. Once the creditors are unable to take collection action against your ex-spouse, they will likely start trying to collect from you.
If your ex-spouse informs you that he or she intends to file a personal bankruptcy and you have a significant amount of joint debt, you may want to consider filing your own Chapter 7 or Chapter 13 case.
If you are interested in learning more about how your ex-spouse’s bankruptcy filing will impact you, contact Faro Crowder, PA to schedule an appointment.