Couples in Missouri, Illinois, Kansas and Oklahoma who are facing financial problems and marital problems simultaneously should take care to protect their financial futures during divorce.
It is not uncommon for separating or divorcing couples in Missouri, Illinois, Kansas, or Oklahoma to experience serious financial problems. In fact, money is a common source of strife in marriages and may even be a contributing factor to the irrevocable breakdown of a marriage.
When this happens, spouses might need to navigate not only how to split up their relationship and assets but also their debts. If debts are serious enough, this may open up the possibility of filing for bankruptcy. Deciding how to balance divorce and bankruptcy together requires careful review of one’s circumstances.
Reviewing different types of bankruptcy
As explained by My Horizon Today, there are two primary forms of consumer bankruptcy. Chapter 7 is perhaps the most well-known and may be the right solution for people with predominately unsecured debts who do not need or want to try and retain assets like homes. This type of bankruptcy can generally be completely in just a few months and therefore may be able to be done jointly before a couple files for divorce.
A Chapter 13 bankruptcy is a form of structured repayment that can last up to five years and allows people to keep homes and other assets. This type of bankruptcy may be hard for people to initiate if they are planning to divorce due to the length of time it lasts.
Reducing debts prior to divorce
NerdWallet recommends that when a couple makes the decision to separate or get divorced, they find a way to stop any future debt from being incurred. It may also be important and helpful to reduce or pay off any joint debts before pursuing a divorce. This is one thing that may be able to make the divorce process simpler as both assets and debts must be divided in a divorce.
Additionally, even if a divorce decree assigns debt liability to one spouse, a creditor may still attempt to collect on that debt from the other spouse if it was initially a joint debt.
Caution urged with mortgages during divorce
Divorcing homeowners should know that mortgage lenders consider homes and home loans to be two different things. Even if one spouse signs a quit claim deed assigning full ownership of a home to the other spouse, Bankrate indicates that both people may be responsible for the mortgage if it remains in both names. This means a foreclosure may end up impacting both spouses’ credit if a joint mortgage remains in effect after a divorce.
Legal assistance is important when managing divorce and bankruptcy
Couples in the Midwest who are in need of a fresh financial start while also ending their marriages should discuss their situations with an attorney. This will allow them to understand the legal and financial ramifications of their decisions so that they can protect their futures.