One of the most common causes of Chapter 7 Bankruptcy or Chapter 13 Bankruptcy is divorce. For years, you have been financially tied to your spouse, sharing income and expenses. Now, you are on your own. You pay all the expenses, rent, utility bills, cable, car and mortgage payments, on your own, but you only have your own income to pay these expenses. It is easy to fall into debt and need help to get out.
If you and your spouse file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy together before divorce, your bankruptcy discharge will apply all the debts of you and your spouse. It does not matter whose name is on the debt or who incurred the debt. Both you and your spouse are covered, regardless of whether you and your spouse intend to remain married or get divorced after the bankruptcy.
If only one spouse files Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, Wisconsin's marital property laws creates something called the “phantom discharge.” While married, one spouse's Chapter 7 Bankruptcy or Chapter 13 Bankruptcy protects the other spouse from collections (with a few exceptions). Although one spouse never filed bankruptcy, that spouse gets the same bankruptcy protection from creditors during the marriage. This is called the “phantom discharge.” However, this only lasts until divorce. Once divorced, the spouse that did not file will be responsible for all debts incurred during the marriage.
Divorce ends the marriage and the ability to file a bankruptcy together. After divorce, you're separate, separate income, separate debts, separate bankruptcies. However, your divorce can still effect your ex-spouse.
When you file a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, you discharge all your debts, whether from before, during, or after your marriage. You will have a fresh start! However, your fresh start does not extend to your ex-spouse. Your ex-spouse will still owe his or her own debts. Moreover, your ex-spouse will still owe debts from the marriage, even after they have been discharged as to you.
Generally, that is tough luck. After all, you're divorced: It is not your problem anymore. However, there is one important exception to this rule. A divorce settlement splits up debts between the the two spouses equally. If a debt assigned to you, that you discharged in your Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, attempts to collect from your ex-spouse, then you may be held liable to repay your ex-spouse, if he or she ultimately repays the debt. Don't be too afraid though. This almost never happens. Contact a qualified attorney at Croke & Croke, S.C. who can explain this in more detail and explain what will likely happen in your own case.
Another important point, Chapter 7 Bankruptcy and Chapter 13 Bankruptcy cannot alter or discharge alimony or child support. Child support survives bankruptcy!
Divorce is one of the most common causes of bankruptcy, and one of the most difficult to effectively deal with without legal help. What's the point of getting a divorce if you pay for the marriage for years afterward? If you are facing divorce and bankruptcy, make sure to contact Croke & Croke, S.C. to get debt free while protecting yourself.