The average American household carries over $15,000 in credit card debt, on top of student loans, mortgages, medical bills, car payments and other financial obligations. More and more people have greater worries about dividing debt during divorce than they do about dividing assets. Just as marital assets are divided, all debt held between the couple may be divided.
With this much debt on many couples’ plates, divorce can be terrifying. Many couples are now looking at bankruptcy as an option to resolve the debt and make divorce a simpler process. A skilled bankruptcy attorney can provide you individualized advice regarding how bankruptcy can be leveraged in your specific situation.
Here are a few things you should consider:
Chapter 7 bankruptcy – Chapter 7 is considered liquidation bankruptcy. Usually, unsecured debt is discharged, including credit card debt and medical bills. There are certain qualifications, however, that must be met for an individual or couple to file, including income and asset values. While you might qualify for Chapter 7 as a couple, you might not as an individual – and vice versa.
Chapter 13 bankruptcy – Chapter 13 is sometimes called consolidation bankruptcy. You keep all or most of the debt, but it is usually consolidated into a manageable repayment plan. Depending on the specifics of your financial situation, including which assets or homes you want to keep, this could be a better option than Chapter 7.
Decided if and when to declare bankruptcy – and how that timeline will line up with a divorce – is a highly complex decision. It is wise to work with a bankruptcy lawyer who can evaluate your situation and provide customized advice that not only addresses your current situation, but provides long-term perspective and protects your future.