When Divorce and Bankruptcy Overlap
Financial difficulties are one of the most common stressors in a marriage. In some cases, one or both spouses may accumulate significant debt—such as credit card balances, medical bills, business liabilities, or unsecured loans—that becomes impossible to manage. When financial pressure reaches this level, bankruptcy may become a realistic consideration at the same time divorce is being contemplated.
At Stange Law Firm, PC, we regularly assist individuals who are navigating the complex intersection of divorce and serious debt. Managing overwhelming financial obligations is difficult on its own. When divorce is added to the equation, the legal and financial consequences can become even more complicated. Our attorneys understand how closely financial decisions and family law outcomes are connected and work to provide clear, practical guidance during this challenging process.
If you are facing both divorce and potential bankruptcy, it is important to speak with a divorce attorney early in the process to understand how these issues may affect one another. You may also contact our firm online to discuss your situation.
Should You File for Bankruptcy or Divorce First?
One of the most common questions individuals ask when both divorce and bankruptcy are under consideration is whether bankruptcy should be filed before or after the divorce. While every situation is unique, many people instinctively want to finalize the divorce first and deal with debt later. However, in many cases, it may be beneficial to at least explore bankruptcy options before filing for divorce.
From a legal and strategic standpoint, addressing debt before divorce can reduce the number of financial issues that must be resolved during the divorce process. If significant marital debt exists, filing bankruptcy beforehand may simplify negotiations related to property division and financial responsibility.
There is also an important legal consideration regarding the dischargeability of debt. Debts that are assigned to a spouse through a divorce decree or marital settlement agreement may later be treated differently in bankruptcy. In many situations, obligations arising from a divorce judgment—particularly those connected to support or hold-harmless provisions—may not be fully dischargeable. As a result, a spouse who agrees to assume certain debts in the divorce may remain legally responsible for them even after a bankruptcy filing.
For these reasons, consulting with both a divorce attorney and a bankruptcy attorney before making a filing decision is often advisable.
The Legal Relationship Between Divorce and Bankruptcy
Federal bankruptcy law and state family law operate independently, but they often intersect in important ways. Bankruptcy courts generally respect family court orders, particularly those involving domestic support obligations. Child support and spousal maintenance obligations are not dischargeable in bankruptcy and must continue to be paid regardless of whether a bankruptcy case is filed.
Property division obligations, however, can be more complex. Some debts assigned in a divorce may survive bankruptcy, especially if they are deemed to be in the nature of support or are intended to protect the other spouse from liability. This means that even if a debt is discharged as to the creditor, a former spouse may still have legal recourse under the divorce judgment if the debt was not paid as ordered.
Additionally, creditors are not bound by divorce decrees. If both spouses are listed on a loan or credit account, the creditor may pursue either party for payment, regardless of how responsibility was divided in the divorce. If one spouse stops paying, the other may still face collection efforts, lawsuits, or credit damage.
These issues highlight why timing and coordination between divorce and bankruptcy decisions can be critical.
Understanding the Limits of Bankruptcy Protection
While bankruptcy can provide powerful relief from debt, it does not eliminate all financial obligations arising out of a divorce. Domestic support obligations, including child support and spousal maintenance, cannot be discharged. In addition, certain divorce-related debts may remain enforceable even after bankruptcy, depending on how they are classified and structured.
Because of these limitations, filing bankruptcy without fully understanding its impact on a pending or future divorce can lead to unintended consequences. A carefully coordinated approach can help reduce long-term financial risk and prevent disputes that may arise after the divorce is finalized.
Although Stange Law Firm, PC does not practice bankruptcy law, we routinely work with and refer clients to experienced bankruptcy attorneys when appropriate. This collaborative approach allows clients to evaluate their options fully and make informed decisions that take both family law and bankruptcy considerations into account.
Schedule a Consultation
If you are considering divorce and are also facing overwhelming debt, it is important to understand how these issues interact before taking action. To learn more about how bankruptcy may affect your divorce, contact Stange Law Firm, PC by phone or online to schedule an initial consultation with one of our experienced multi-state divorce attorneys.
