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Divorce Debt In Bankruptcy

By Kurt O'Keefe, Attorney at Law

We have lots of divorces and too much debt in America today.

As an attorney who has done lots of domestic law work, I recall the time when the court divided the property between the husband and wife, including the value in their house.

Well, those days are gone, as the song says.

One of the prime causes of marriages falling apart is money troubles.

There is no value now to split up in most cases.

But, in most cases, both husband and wife are on the mortgage.

The house is awarded to someone, but the divorce judge is without power to remove a name from of a mortgage, or any other contract, that you signed.

The divorce judgment binds only the people actually getting divorced.

The Total Money Makeover, by Dave Ramsey, the myth on page 66:

“My divorce decree says my spouse has to pay the debt, so I don’t.”

WRONG!

Total myth, yet I still find people who believe it.

Whatever debt you signed for before the divorce, you still owe.

All a divorce judge can do is make one spouse indemnify, or reimburse, the other, for whatever he/she spent paying a debt the other was ordered to pay.

That means you pay the debt first, and then chase your ex for what it cost you, to get reimbursed.

Not the best financial planning.

If you are getting divorced, especially with kids involved, your expenses are probably not going down as much as your income.

So if you were financially in the hole before the divorce, that hole will just get deeper.

And if you try to pay everyone you were ordered to pay, what if your ex files bankruptcy, taking his or her name off the debts?

This means you are the only one the creditors can chase.

So work on your post divorce budget, and discuss your options with a bankruptcy lawyer before you get break up.

That is planning.

Debts you are ordered to pay in a divorce judgment are not dischargeable, that is, you cannot get out of them, in Chapter 7 bankruptcy..

So don’t think you can just make that divorce deal and waltz over to bankruptcy court and get out of the bills you agreed to pay.

Plan

Divorce Debt In Bankruptcy

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Full post as published by Bankruptcy Law Network on October 08, 2010 (boomark / email).