Sadly, financial pressures end many marriages.
Video Transcribed: Edward Kelly here at 188 Debtline. Finishing up our series on bankruptcy and divorce. As I’ve been advocating throughout, bankruptcy can be a wonderful tool to truly help you get a fresh start. If you’re in the middle of a divorce, often that’s been caused by financial difficulties, lack of money and debt piled up by one or the other spouse, or both. Those pressures sadly kill many relationships. If it’s over and you’re moving on, you don’t want to start over saddled with the debt of yourself or the other spouse. And so to illustrate this, I’m just going to, I’ve been talking about the pitfalls as well. I’m going to just give two examples. One, a divorce can greatly benefit from a bankruptcy while that divorce is occurring, and the other one that is not a good candidate.
So let’s say what’s not a good candidate first, get the negative out of the way. So let’s say you’ve got a 35 year marriage. Husband is a professional who’s made a high salary. Wife has made perhaps less of a salary or traditionally raised a kids, more of a traditional kind of home. She is going to be awarded the marital home, she’s going to be given support alimony. She’s also going to get a lump sum property settlement payment for the extensive assets of the husband. Here’s going to be a problem.
So number one, if they filed together, you’re going to be considering, maybe I’ll get into this into a later series. If you’re living separately, you can file married but actually include the expenses of both separate households which can really help you make it on the means test, meaning you qualify for a seven even though your income might normally be over. But I’m saying in this case someone who definitely wouldn’t, the husband definitely wouldn’t qualify for a seven.
So if you do this during the divorce, you’re going to be including both incomes. You’re not going to qualify. Also you’re going to have significant assets that are going to be awarded in the divorce. So even if the wife files solo, they’re going to be looking at that decree, particularly the lump sum in lieu of property settlement and all of that, or at least the amount of to what is owed to the creditors can be taken.
So this is going to be problematic and you’ll see these come in and cause problems for everyone involved. Sometimes you’ll see a seven where someone is trying to use a chapter seven as a tool in a divorce where they’re trying to push all the assets to one side under the pretense that one party won’t get anything. But obviously that’s not how it’s really going to out. These don’t end well. I’ve seen that several times. Not a good candidate.
Or how about this? I’m married five years, both work, blue collar, not real high paying jobs, in order to fund the marriage. Lots and lots of credit card debt, medical bills, been problems with health. We see this again and again. Marriage is falling apart under the financial pressures. Couple doesn’t have enough money really to spend much on the bankruptcy, so this is a classic case. File together before your divorce goes through. You can agree that all of the marital debt will be thrown into the bankruptcy as to both parties so you can both walk away without having any of it.
In this case, there’s not going to be a lot of assets. Maybe the marital home. You can determine who gets that. You’re going to be careful on who gets the debt. This is one where you probably don’t want to have one person get possession of a car or house and the other one have the debt. In any case, both are going to discharge their personal obligation as to all of that.
I’ll refer you back to my series on reaffirming the house and the vehicles. Got to bear in mind, if you don’t reaffirm the vehicles, they’re probably going to get repossessed at this point, the way the creditors are behaving lately.
But this is an example of a perfect candidate. If you’re going to do a divorce, and so many divorces have so much debt, do a bankruptcy before it’s over. Use it as a tool to get a clean slate. I see again and again where people divorce and then one of them ends up in bankruptcy then the other one. I could have taken care of all of that.
So hopefully this series has helped you see if you fall into that latter category, bankruptcy can be a powerful tool to allow you to truly start over. So as always, if you have any questions or you want to talk to me, 188 Debtline or Edward at wirthlawoffice.com