Is Bankruptcy For You?

By Staff Writer

For many who are contemplating or in the process of a divorce, financial pressures only continue to mount. Whether you or entered the process with large amounts of credit or other debt or have accrued debt recently, you will likely find the financial pressures overwhelming. Unfortunately, many who did not accumulate debt on their own may be shocked to learn that their spouse’s debt which was incurred during the marriage, may be considered a marital debt and, as such, distributable to both parties.

If your creditors are calling you incessantly and have begun attacking your assets and income, filing bankruptcy may be able to provide you with a fresh start. Bankruptcy is a legal way to eliminate your debt and, for many, is the only answer to their financial problems. Once filed, a bankruptcy will automatically stay, or temporarily stop, your creditors from trying to collect on your debts. At the end of the bankruptcy process, most of your debts will be discharged by the Court and you will no longer legally owe your creditors. Bear in mind, however, that even in bankruptcy some debts, known as "non-dischargeable" liabilities, cannot be discharged. One such non-dischargeable obligation is any debt that is in the nature of support, such as back child support or alimony.

Because support-related debts cannot be discharged, it is vital that you obtain an attorney to carefully draft your divorce paperwork Depending on how your divorce or separation papers are worded and prepared, some of the obligations set forth in these documents may be discharged in bankruptcy. An attorney can help ensure that your former partner’s divorce obligations cannot be discharged in a bankruptcy filing.

If after you file bankruptcy you change your mind, you can ask the court to dismiss your case. As a general rule, a court will dismiss a Chapter 7 bankruptcy case as long as the dismissal won't harm the creditors. Usually, you can file again if you want to.

If you do file for bankruptcy, it is possible to rebuild your credit. The record of filing bankruptcy may technically stay on your credit for up to 10 years. However, by making payments on time subsequent to your bankruptcy you can sometimes regain an "A" credit rating within 2 years of your discharge. Bankruptcy may actually help your credit rating because discharging your debts greatly improves your debt to income ratio.