Bankruptcy And Divorce

Divorce Settlement Agreements and Bankruptcy

In the state of Florida, property and assets that are acquired during the marriage must be divided equitably. Examples of assets include bank accounts, 401K’s and other retirement funds, equity in the home, timeshares, and any other asset that was bought during the marriage. The legal interest in all of the aforementioned can be changed through the divorce process and execution of the proper documents. Your debt, however, is a different story. The terms of a property settlement in a divorce do not affect the contractual agreements that you signed with your creditors while you were married.

Co-Signor

If you co-sign on a loan or credit account, you are responsible its debt even if you never used the card or benefited from the loan. You can be held responsible even if your divorce settlement states that your former-spouse is responsible for paying the debt. For these reasons, it’s important to determine how the marital assets and marital debts will be distributed because this may affect whether you qualify for a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

Jointly Held Credit and the Impact of Marital Debt on Bankruptcy

Your divorce settlement does not legally modify your legal contractual obligations to creditors. Even if your spouse agrees in the divorce settlement to assume the payment of a credit card that was jointly held or a car loan that you signed for, if your former spouse stops paying – you can pretty much bet that the creditor will turn to you for payment of the obligation. If your former-spouse files for bankruptcy, the creditors involved can try and collect the unpaid debt from you. Many people think that a divorce settlement agreement shifts the obligation to pay a debt to the former spouse that agreed to pay it. The reality is that a divorce settlement agreement does not change the original credit terms that you entered into while you were married.

Child Support and Spousal Support

Child support or spousal support obligations are not dischargeable in bankruptcy. The only way to lower your child support or alimony payments is to file a post-divorce action with the family courts and request a modification of the original terms.

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