Fort Lauderdale Divorce Attorney
Bankruptcy and Your Florida Divorce
Divorce and financial difficulties tend to go hand in hand, particularly when one household becomes two, with each party having his or her own expenses. As a result, you may consider whether filing a joint bankruptcy prior to your divorce would be beneficial to you. Another option is to wait until your divorce is final and then assess your need for an individual bankruptcy discharge. Not only can bankruptcy eliminate your debt struggles, but it also can simplify your divorce proceedings. A bankruptcy discharge can relieve you and your soon-to-be-ex-spouse from financial obligations that neither one of you can afford.
Bankruptcy is a legal proceeding that takes place in your local federal court. The most common types of bankruptcy that consumers use are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcy is often known as “liquidation” bankruptcy, because it is meant to give debtors a fresh start by totally eliminating all eligible debts. During a Chapter 7 bankruptcy, a certain amount of your property is liquidated and sold, with the proceeds of the sale being applied to your outstanding debts in order of priority. After liquidation occurs, the remainder of eligible debts are completely wiped out.
On the other hand, Chapter 13 is primarily a form of debt relief for individuals who are not eligible for Chapter 7 relief due to income limits. During Chapter 13, bankruptcy, your debts are reorganized over a three to five year period. During this time period, you are required to make certain payments on a monthly basis to a bankruptcy trustee, who then applies the funds toward your debts. At the end of the payment plan, any remaining debt is discharged.
Whether it makes sense for you and your spouse to file bankruptcy prior to divorce depends on a number of factors, including your ability to be on the same page about your debts and your ability to pay those debts. You also need to look at your debt burden to see how many of your debts are eligible for a bankruptcy discharge. Some major debts are non-dischargeable under federal bankruptcy law. This means that even if you file for bankruptcy, you still will be stuck with those debts. Common types of non-dischargeable debts include student loans, federal and state tax debts, and child support debts.
Secured Property and Bankruptcy
Another issue to explore, particularly in light of your divorce, is which debts are secured by property that you or your spouse wishes to keep. In most cases, if you want to keep the property, you also will be responsible for the debt. For instance, if you want to keep a vehicle that has a monthly loan payment, then you need to ensure that you can make the monthly payments. You can choose to keep these items of property and keep paying the loans associated with them by removing them from your bankruptcy case altogether, or “reaffirming” these debts. However, if a secured debt is in both of your names, you should take steps to ensure that whomever is responsible for the loan refinances it solely in his or her own name. This prevents the other spouse from being held liable for the payments on that debt in the future.
Contact Your Fort Lauderdale Divorce Attorney for Help
In appropriate cases, divorce and bankruptcy can go hand in hand, but both the suitability of bankruptcy and its timing are crucial. You should always discuss these issues in a comprehensive manner with an experienced Florida divorce lawyer who is familiar with the impact that bankruptcy can have on a divorce, and vice versa. Contact the Vanessa L. Prieto Law Offices, LLC, and learn how bankruptcy may benefit you if you are facing impending divorce proceedings.