Can Bankruptcy Clear My Ex Spouse's Debts After Divorce?

By Heather Frances J.D.

When a couple divorces, the court issues a divorce decree that divides assets and debts between the spouses, but either spouse can file bankruptcy after the divorce. If your ex-spouse files bankruptcy rather than paying the debts assigned to him in the divorce, you may have to deal with creditors of joint debts on which you are still listed.

When a couple divorces, the court issues a divorce decree that divides assets and debts between the spouses, but either spouse can file bankruptcy after the divorce. If your ex-spouse files bankruptcy rather than paying the debts assigned to him in the divorce, you may have to deal with creditors of joint debts on which you are still listed.

Creditors

Your divorce decree’s terms control your behavior and that of your spouse -- but not your creditors. If your divorce decree assigns a joint debt to your spouse for payment but he files for Chapter 7 bankruptcy, your creditors can pursue repayment from you instead, even if your divorce decree says otherwise. If your ex-spouse has debts listed only in his name, creditors likely cannot collect that debt from you, though they may try to harass you into paying.

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Chapter 7 Discharge

Your ex-spouse could file Chapter 7 bankruptcy, which may involve the sale of certain assets. A bankruptcy court can give your ex-spouse a discharge, or elimination, of debts that remain unpaid because there are not enough assets to cover them. However, only your spouse is relieved of the obligation to pay these debts, so you are still liable to pay even if your divorce decree says the debt belongs to your ex-spouse.

Hold Harmless

If your marital settlement agreement or divorce decree contains a “hold harmless” clause, the clause makes your ex-spouse responsible to pay your share of certain debts, even when your name is on the debt. In some ways, such a clause supersedes some bankruptcy and contract laws because it prevents the bankruptcy court in a Chapter 7 case from entirely erasing your ex-spouse’s responsibility to pay the debt. The bankruptcy court can only discharge your ex-spouse's obligations to the creditor, not his obligation to you. You may initially have to pay the debt if your spouse fails to do so, but you can take him back to court to enforce the terms of your divorce, specifically the hold harmless clause. The court can order your ex-spouse to reimburse you for any payments you had to make on the joint debts.

Chapter 13

Your ability to enforce a hold harmless clause applies only to a Chapter 7 case. Chapter 13 bankruptcy, which involves a repayment plan over three to five years, can override hold harmless clauses because the court is able to eliminate your ex-spouse’s obligation to pay you back if the creditor comes after you to collect the debt. However, your ex-spouse’s Chapter 13 bankruptcy offers you the protection of an automatic stay, or postponement, of collection actions on joint debts, so the creditors cannot come after either of you while the Chapter 13 case is pending.

Divorce is never easy, but we can help. Learn More
Assuming a Debt in Divorce

References

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How Is Marital Debt Divided in a Divorce in Georgia?

Georgia is an equitable distribution state, so one spouse always runs the risk of having more than half the marital debt assigned to him for payment in a divorce. Courts in equitable distribution states are not obligated to divide marital property or debts 50/50. The law gives judges the discretion to distribute debts and assets between divorcing spouses in a way that seems fair. Judges can take several factors into consideration, including the respective incomes of the parties and their ability to pay. This can result in a 60/40 distribution of debt, or even 70/30.

Can One Party in a Marriage File Bankruptcy?

In most respects, marriage legally joins two people at the hip, but this is not always the case when it comes to financial obligations. No law exists that says your spouse must join you if you decide to file for bankruptcy. There may be some downsides to going it alone, however.

Release of Former Spouse From Liability on a Joint Vehicle After Divorce

If the court awards you the family car in the divorce settlement, it may give you the car loan, too. If you and your spouse are both on the loan, the court may require you to remove your spouse's liability for repayment of the loan. This usually involves working with your bank to refinance the loan or pay it off.

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