Bankruptcy and Divorce

Divorce can often lead to additional financial struggles and eventually end in filing for Chapter 7 Bankruptcy or Chapter 13 – Debtor’s Court. Both the loss of income and the added expense of the divorce lead many people to file Chapter 7 Bankruptcy or Chapter 13 Debtor’s Court after filing for divorce.

There are two main financial issues that arise due to divorce:

1. Child Support

2. Which spouse pays which debts (marital debts)

Child Support

Many parents fall behind on child support payments. This can lead to additional fees, interest and in extreme examples, jail. One solution available for anyone liable to pay child support, but who has fallen behind, is Chapter 13 Debtor’s Court.

By filing Chapter 13 Debtor’s Court, the spouse responsible to pay the child support is able to put the arrearage (back child support) into a Chapter 13 plan and pay it off over a five year period. Current child support payments must also be made. Thus, the spouse responsible to pay the child support will have two payments: 1. the current (normal) child support and 2. the payment to the chapter 13 trustee for the back child support.

Marital Debts

This is one of the most misunderstood aspects of divorce. Many people believe that just because the divorce decree states that their ex-spouse must pay for the debt (whether it is a credit card, car, or home) that they are no longer responsible to the creditor for this debt; this is absolutely false.

If both parties (husband and wife) are responsible for the debt before the divorce, in the eyes of the creditor, they are still liable for the debt after the divorce. Even if the divorce decree states that one party is “responsible” for the debt, this does NOT mean the creditor cannot collect the debt from the spouse deemed no longer responsible by the divorce decree. Thus, it is imperative for ex-spouses to make sure that each party is paying the debts they are responsible for.

It is quite common for one ex-spouse to default on the debt, then the creditor begins to collect from the other ex-spouse. Not only can this added extra stress and financial burden to the “innocent spouse” but it can also effect the consumer’s credit report. Many debtors ruin not only their own credit reports, but also the credit reports and credit scores of their ex-spouses when they default on marital debts. Eventually debt collectors and debt buyers can become involved leading to creditor harassment, debt collection lawsuit, repossession or foreclosure.

If you have questions about bankruptcy, debtor’s court, child support, marital debts or how divorce and bankruptcy relate, please feel free to contact us for a free consultation.

Birmingham, Alabama Chapter 7 Bankruptcy and Chapter 13 Debtor’s Court Lawyers

Alabama Consumer Protection Attorneys representing clients throughout Alabama in Birmingham, Mobile, Dothan, Enterprise, Eufala, Auburn, Montgomery, Tuscaloosa, Anniston, Gadsden, Hoover, Cullman, Huntsville, Florence, Tuscumbia, Decatur, Leeds, Moody, Sprigville, Alabaster and Pelham.