Sometimes financial difficulties can put a strain on a marriage, which may even result in a separation or divorce. If you and your spouse were struggling with debt during your marriage, you may continue to face problems after your divorce simply because running two households is more costly than one.
If you decide to divorce, you and your spouse will divide not only marital property, but also marital debt. If the parties have substantial credit card debt, car loans or other outstanding debt, those obligations will be divided, sometimes unequally.
Despite one spouse being assigned a particular debt, such as a car payment, both of your names will still be on the purchase agreement and, therefore, you both remain responsible for payments. Unfortunately, divorce does little to solve financial problems that existed during the marriage so sometimes you have to look at all your options.
With this in mind, you and your spouse may want to consider bankruptcy protection before you divorce to allow you to get a fresh start. Of the bankruptcy options, there are two types of bankruptcy individuals and couples typically consider: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is referred to as a liquidation bankruptcy whereas those who qualify are able to get a clean slate. Generally speaking, debts are paid through the proceeds from the sale of property and the remaining debts are discharged at the end with a few exceptions such as student loans or tax debt. The process takes about three months to complete so you and your spouse can start anew quickly.
A Chapter 13 bankruptcy is a reorganization bankruptcy and is usually for wage earners who need more time to pay off their debt. The process typically runs anywhere from 3 to 5 years and any qualifying remaining debt will be discharged at the end of the period. Although you will not be able to write off your debt free and clear, it does offer more time and protection from creditors while you and your spouse get up and running on separate courses.
Whether it makes sense to file jointly before your divorce depends on whether you and your spouse both qualify for Chapter 7 and the type of debt you have as some debt is not dischargeable. Your ability to work together to solve you difficult financial situation is important too.
Divorce sometimes involves a few hurdles, which are easier to overcome with the help of an experienced family law attorney who can work with you to navigate the process as a whole. Contact the Law Offices of Ronald L. Bell for answers to your questions regarding divorce, Illinois marital property and debt division, child support and custody issues, spousal maintenance and more. We welcome the opportunity to help you. Call today at 847-495-6000.