Divorce proceedings help spouses separate their lives and end their legal connections to one another. The process of divorce usually requires the division of property and marital debts.
Couples work together to negotiate terms for the division of their property and their shared financial obligations. If they cannot reach an agreement, then a family law judge applies state law based on their knowledge of marital circumstances and the extent of the marital estate.
Some couples may worry about the impact of marital financial obligations on their lives after divorce. In some cases, matrimonial bankruptcy can be an important step prior to divorce.
What is matrimonial bankruptcy?
Married people with significant financial obligations have the option of filing for bankruptcy as individuals or jointly as a married couple. The decision to file for matrimonial bankruptcy can help both spouses eliminate separate debts and can result in the discharge of shared financial obligations, like joint credit cards.
Bankruptcy provides an automatic stay that prevents collection activity after people first file. A successful bankruptcy also leads to the discharge of any remaining amounts due on eligible debts, which can free people from the burden of repaying marital debts after the divorce.
Why do people discharge debts instead of dividing them?
Matrimonial bankruptcy can be beneficial for several reasons. Each spouse can enjoy a fresh start after the divorce. They can focus on rebuilding instead of worrying about paying off marital debts for years to come.
Matrimonial bankruptcy is also beneficial because it eliminates the possibility of one spouse defaulting. People sometimes fail to pay what they should even when subject to a family court order making them responsible for a joint credit card.
If the party ordered to pay the debt defaults or files for bankruptcy, the other spouse could be subject to collection activity or legal action. The decision to eliminate those shared debts through matrimonial bankruptcy eliminates the possibility of financial misconduct that could harm either spouse after the divorce.
Exploring solutions for financial issues, including matrimonial bankruptcy, can be beneficial for those preparing for divorce. The elimination of marital debts can make it easier for couples to fairly divide the property and remaining financial obligations included in the marital estate.