Since 1967 there have been several studies that rank stress due to a traumatic life event. The studies agree that divorce causes tremendous stress in a person’s life, and is number two in the rankings for most studies, behind death of a spouse or child.
Since divorce is such a stressful time, it is no wonder that people make mistakes with their finances during a divorce. Many couples either overlook or ignore the economic realities of their changed financial condition. In some cases financial mistakes made during the divorce can lead to bankruruptcy. In other situations bankruptcy is simply inevitable.
One financial mistake divorced couples commonly make is a misunderstanding of the family court’s “assignment” of a joint debt to one of the spouses. The family court has the authority to order one spouse to pay a particular joint debt. For instance, husband pays the MasterCard; wife pays the car payment and keeps the car. The court order may contain a “hold harmless” provision that means that if the obligated spouse does not pay the debt, and the other spouse is harmed, the obligated spouse is responsible to repair the harm (usually this means money damages). This order is enforceable through the court’s contempt power.
Many people mistake this assignment as an alteration of the contract with the creditor. The family court’s order does not change the couple’s joint obligation on the debt because the creditor was not a party to the couple’s divorce case. A joint debt remains legally enforceable against both or either party even after the divorce. If the obligated spouse does not pay pursuant to the family court’s order or the terms of the contract, the only recourse is to cry foul to the family court judge. The creditor can pursue any legal action to collect on the debt including reporting the delinquent account to the credit bureaus, filing a lawsuit against both spouses, and repossession or foreclosure as authorized by law.
Many couples can benefit from filing bankruptcy before a divorce is final. In most circumstances property that is owed by a husband and wife receives better protection from creditors than it receives if owned by a single person. Some debts that are ordered by a family court cannot be discharged by the bankruptcy court, so it is better to discharge those debts prior to a family court order. In some cases, if one spouse files bankruptcy and discharges a debt, a family court cannot reassign that debt to the discharged debtor.
Divorce can complicate the legal obligations of a divorcing couple’s finances. If you and your spouse are considering divorce and have significant debt, speak with an experienced bankruptcy attorney and discuss your options before finalizing your divorce.
Showing posts with label family court. Show all posts
Showing posts with label family court. Show all posts
Monday, October 4, 2010
Divorce Debt and Bankruptcy
Since 1967 there have been several studies that rank stress due to a traumatic life event. The studies agree that divorce causes tremendous stress in a person’s life, and is number two in the rankings for most studies, behind death of a spouse or child.
Since divorce is such a stressful time, it is no wonder that people make mistakes with their finances during a divorce. Many couples either overlook or ignore the economic realities of their changed financial condition. In some cases financial mistakes made during the divorce can lead to bankruruptcy. In other situations bankruptcy is simply inevitable.
One financial mistake divorced couples commonly make is a misunderstanding of the family court’s “assignment” of a joint debt to one of the spouses. The family court has the authority to order one spouse to pay a particular joint debt. For instance, husband pays the MasterCard; wife pays the car payment and keeps the car. The court order may contain a “hold harmless” provision that means that if the obligated spouse does not pay the debt, and the other spouse is harmed, the obligated spouse is responsible to repair the harm (usually this means money damages). This order is enforceable through the court’s contempt power.
Many people mistake this assignment as an alteration of the contract with the creditor. The family court’s order does not change the couple’s joint obligation on the debt because the creditor was not a party to the couple’s divorce case. A joint debt remains legally enforceable against both or either party even after the divorce. If the obligated spouse does not pay pursuant to the family court’s order or the terms of the contract, the only recourse is to cry foul to the family court judge. The creditor can pursue any legal action to collect on the debt including reporting the delinquent account to the credit bureaus, filing a lawsuit against both spouses, and repossession or foreclosure as authorized by law.
Many couples can benefit from filing bankruptcy before a divorce is final. In most circumstances property that is owed by a husband and wife receives better protection from creditors than it receives if owned by a single person. Some debts that are ordered by a family court cannot be discharged by the bankruptcy court, so it is better to discharge those debts prior to a family court order. In some cases, if one spouse files bankruptcy and discharges a debt, a family court cannot reassign that debt to the discharged debtor.
Divorce can complicate the legal obligations of a divorcing couple’s finances. If you and your spouse are considering divorce and have significant debt, speak with an experienced bankruptcy attorney and discuss your options before finalizing your divorce.
Since divorce is such a stressful time, it is no wonder that people make mistakes with their finances during a divorce. Many couples either overlook or ignore the economic realities of their changed financial condition. In some cases financial mistakes made during the divorce can lead to bankruruptcy. In other situations bankruptcy is simply inevitable.
One financial mistake divorced couples commonly make is a misunderstanding of the family court’s “assignment” of a joint debt to one of the spouses. The family court has the authority to order one spouse to pay a particular joint debt. For instance, husband pays the MasterCard; wife pays the car payment and keeps the car. The court order may contain a “hold harmless” provision that means that if the obligated spouse does not pay the debt, and the other spouse is harmed, the obligated spouse is responsible to repair the harm (usually this means money damages). This order is enforceable through the court’s contempt power.
Many people mistake this assignment as an alteration of the contract with the creditor. The family court’s order does not change the couple’s joint obligation on the debt because the creditor was not a party to the couple’s divorce case. A joint debt remains legally enforceable against both or either party even after the divorce. If the obligated spouse does not pay pursuant to the family court’s order or the terms of the contract, the only recourse is to cry foul to the family court judge. The creditor can pursue any legal action to collect on the debt including reporting the delinquent account to the credit bureaus, filing a lawsuit against both spouses, and repossession or foreclosure as authorized by law.
Many couples can benefit from filing bankruptcy before a divorce is final. In most circumstances property that is owed by a husband and wife receives better protection from creditors than it receives if owned by a single person. Some debts that are ordered by a family court cannot be discharged by the bankruptcy court, so it is better to discharge those debts prior to a family court order. In some cases, if one spouse files bankruptcy and discharges a debt, a family court cannot reassign that debt to the discharged debtor.
Divorce can complicate the legal obligations of a divorcing couple’s finances. If you and your spouse are considering divorce and have significant debt, speak with an experienced bankruptcy attorney and discuss your options before finalizing your divorce.
Tuesday, February 23, 2010
Bankruptcy and Court Ordered Marital Obligations
Bankruptcy can have a serious impact on an ex-spouse. That is because a family court will often assign payment of a joint debt to one party only. In many cases the obligated party lacks the resources to pay the debt in full or to refinance it. Therefore the ex-spouse remains legally obligated to the creditor. This is often the case with automobile debt and credit cards with large balances.
A court-ordered debt to a former spouse is given special consideration by the bankruptcy laws. In a Chapter 7 bankruptcy case these debts are generally non-dischargeable. An order directing payment to a third party (e.g. a mortgage payment) is also generally non-dischargeable if the payment is effectively a form of spousal support. Even an obligation to pay your ex-spouse’s attorney fees in connection with the divorce proceeding is generally non-dischargeable.
While past due support obligations are also non-dischargeable debts in a Chapter 13 bankruptcy, debts not in the nature of support (e.g. a division of marital property) can be discharged. The ex-spouse must contest the debtor’s characterization of the obligation and convince the bankruptcy court that the debt is a support obligation in order to save it from discharge. If the court determines the debt is a support obligation, it must be paid by the debtor through the Chapter 13 bankruptcy.
Whether the family court-ordered obligation arises from a property division or from a support obligation, the ex-spouse will likely suffer harm from the debtor’s bankruptcy filing. The sad truth is that any non-payment of a joint monthly obligation will harm the ex-spouse’s credit report and there is little that can be done to remedy it. If the debt is discharged through the debtor’s Chapter 13 bankruptcy, the creditor may elect to pursue the ex-spouse and there will be no recourse against the debtor.
Regardless whether you or your ex-spouse owes a court-ordered joint obligation, if bankruptcy is in the future, you should seek professional help. It is important to evaluate the impact the bankruptcy will have on the debt and determine a course of action that will best protect you. Timing can be very critical, so consult with an experienced bankruptcy attorney early.
A court-ordered debt to a former spouse is given special consideration by the bankruptcy laws. In a Chapter 7 bankruptcy case these debts are generally non-dischargeable. An order directing payment to a third party (e.g. a mortgage payment) is also generally non-dischargeable if the payment is effectively a form of spousal support. Even an obligation to pay your ex-spouse’s attorney fees in connection with the divorce proceeding is generally non-dischargeable.
While past due support obligations are also non-dischargeable debts in a Chapter 13 bankruptcy, debts not in the nature of support (e.g. a division of marital property) can be discharged. The ex-spouse must contest the debtor’s characterization of the obligation and convince the bankruptcy court that the debt is a support obligation in order to save it from discharge. If the court determines the debt is a support obligation, it must be paid by the debtor through the Chapter 13 bankruptcy.
Whether the family court-ordered obligation arises from a property division or from a support obligation, the ex-spouse will likely suffer harm from the debtor’s bankruptcy filing. The sad truth is that any non-payment of a joint monthly obligation will harm the ex-spouse’s credit report and there is little that can be done to remedy it. If the debt is discharged through the debtor’s Chapter 13 bankruptcy, the creditor may elect to pursue the ex-spouse and there will be no recourse against the debtor.
Regardless whether you or your ex-spouse owes a court-ordered joint obligation, if bankruptcy is in the future, you should seek professional help. It is important to evaluate the impact the bankruptcy will have on the debt and determine a course of action that will best protect you. Timing can be very critical, so consult with an experienced bankruptcy attorney early.
Bankruptcy and Court Ordered Marital Obligations
Bankruptcy can have a serious impact on an ex-spouse. That is because a family court will often assign payment of a joint debt to one party only. In many cases the obligated party lacks the resources to pay the debt in full or to refinance it. Therefore the ex-spouse remains legally obligated to the creditor. This is often the case with automobile debt and credit cards with large balances.
A court-ordered debt to a former spouse is given special consideration by the bankruptcy laws. In a Chapter 7 bankruptcy case these debts are generally non-dischargeable. An order directing payment to a third party (e.g. a mortgage payment) is also generally non-dischargeable if the payment is effectively a form of spousal support. Even an obligation to pay your ex-spouse’s attorney fees in connection with the divorce proceeding is generally non-dischargeable.
While past due support obligations are also non-dischargeable debts in a Chapter 13 bankruptcy, debts not in the nature of support (e.g. a division of marital property) can be discharged. The ex-spouse must contest the debtor’s characterization of the obligation and convince the bankruptcy court that the debt is a support obligation in order to save it from discharge. If the court determines the debt is a support obligation, it must be paid by the debtor through the Chapter 13 bankruptcy.
Whether the family court-ordered obligation arises from a property division or from a support obligation, the ex-spouse will likely suffer harm from the debtor’s bankruptcy filing. The sad truth is that any non-payment of a joint monthly obligation will harm the ex-spouse’s credit report and there is little that can be done to remedy it. If the debt is discharged through the debtor’s Chapter 13 bankruptcy, the creditor may elect to pursue the ex-spouse and there will be no recourse against the debtor.
Regardless whether you or your ex-spouse owes a court-ordered joint obligation, if bankruptcy is in the future, you should seek professional help. It is important to evaluate the impact the bankruptcy will have on the debt and determine a course of action that will best protect you. Timing can be very critical, so consult with an experienced bankruptcy attorney early.
A court-ordered debt to a former spouse is given special consideration by the bankruptcy laws. In a Chapter 7 bankruptcy case these debts are generally non-dischargeable. An order directing payment to a third party (e.g. a mortgage payment) is also generally non-dischargeable if the payment is effectively a form of spousal support. Even an obligation to pay your ex-spouse’s attorney fees in connection with the divorce proceeding is generally non-dischargeable.
While past due support obligations are also non-dischargeable debts in a Chapter 13 bankruptcy, debts not in the nature of support (e.g. a division of marital property) can be discharged. The ex-spouse must contest the debtor’s characterization of the obligation and convince the bankruptcy court that the debt is a support obligation in order to save it from discharge. If the court determines the debt is a support obligation, it must be paid by the debtor through the Chapter 13 bankruptcy.
Whether the family court-ordered obligation arises from a property division or from a support obligation, the ex-spouse will likely suffer harm from the debtor’s bankruptcy filing. The sad truth is that any non-payment of a joint monthly obligation will harm the ex-spouse’s credit report and there is little that can be done to remedy it. If the debt is discharged through the debtor’s Chapter 13 bankruptcy, the creditor may elect to pursue the ex-spouse and there will be no recourse against the debtor.
Regardless whether you or your ex-spouse owes a court-ordered joint obligation, if bankruptcy is in the future, you should seek professional help. It is important to evaluate the impact the bankruptcy will have on the debt and determine a course of action that will best protect you. Timing can be very critical, so consult with an experienced bankruptcy attorney early.
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