Can I File for Bankruptcy if I Am Getting a Legal Separation?

By Rob Jennings J.D.

Current law allows you to file an individual bankruptcy regardless of whether you're married or in the process of getting a legal separation. You can file a joint bankruptcy with your spouse either during marriage or during an ongoing separation case. While the law makes bankruptcy an option for you regardless of your marital status, filing while you are in the midst of a legal separation can complicate your case.

Legal Separation

Legal separation refers to the process of formally resolving the controversies that arise out of a marital breakup. Couples planning to divorce must deal with issues of child custody and support (if they have children), spousal support and property and debt distribution. While many states allow you to get a divorce without a legal separation through no-fault divorce, you typically need only comply with your state's mandatory physical separation period before filing your petition. However, by seeking a legal separation, the court clearly defines your rights and responsibilities to one another upon separation.

Chapter 7 vs. Chapter 13

If you're considering bankruptcy, you can choose between Chapter 7 and Chapter 13. In Chapter 7, your non-exempt assets are sold and the proceeds applied against your outstanding debts, after which you receive a discharge of your eligible debts. In Chapter 13, you pay a percentage of your income to your creditors for a period of three to five years before your discharge becomes final. While you're allowed to file in either chapter during your separation case, the outcome of spousal support and property and debt division hearings can affect your bankruptcy. Your spouse being ordered to pay you alimony or assist in paying your debts could render you ineligible for Chapter 7 and leave Chapter 13 as your only viable bankruptcy option. In Chapter 13, receiving alimony could increase your disposable income and cause an increase in your plan payments.

Divorce is never easy, but we can help. Learn More

Nondischargeable Debts

Regardless of whether you file for Chapter 7 or Chapter 13, certain debts are nondischargeable, meaning they'll still be there when your case is over. Child and spousal support -- past, present and future -- will survive the bankruptcy and remain collectible afterwards. Student loans and certain tax debts are also nondischargeable. In Chapter 7, responsibility to the other spouse for marital debts is nondischargeable as well. This means that if the court assigns a joint debt to you in your separation case and the creditor comes after your spouse when you receive bankruptcy protection, your spouse can come after you -- even if the creditor cannot.

Other Effects

Just as your legal separation case can affect your bankruptcy, your bankruptcy can affect your legal separation. If you receive a discharge of your debts in federal court, your state family court could use your additional disposable income to reduce your alimony award if you're a receiving spouse, or increase your obligation if you're a paying spouse. If your spouse gets saddled with debts that otherwise would have been distributed to you, she may try to use this additional responsibility -- and your new-found financial freedom -- to obtain an upwards deviation of your state's child support guidelines.

Divorce is never easy, but we can help. Learn More
Bankruptcy During Divorce Proceedings
 

References

Related articles

Are Apartment Leases Dischargeable in Chapter 7 Bankruptcy?

If you are renting an apartment and filing for Chapter 7 bankruptcy, you will have to make an important decision regarding the lease that you signed. The bankruptcy law considers unpaid rent as a form of unsecured debt; this debt may be discharged at the end of the bankruptcy process. However, your landlord may evict you for non-payment of current and future rent. If you wish to stay in your home, you have options.

How to List Your Spouse in a Bankruptcy to Discharge Community Debt

For spouses who live in community property states, most property and debts acquired during the marriage are considered under the joint ownership and responsibility of both spouses. So unless you list your spouse as a co-debtor on the bankruptcy petition, she will likely remain on the hook for your shared debts, even if your individual responsibility for them was discharged by the bankruptcy.

How Will it Affect Me if My Husband Is Going to File for Bankruptcy Before We Divorce in California?

Your husband's decision to file for bankruptcy, either before you file for divorce or before your divorce is final, can negatively affect you in several different ways. Because California considers property acquired during the marriage to be shared marital property, family assets may be seized to pay your husband's debts; creditors also will come after you for all marital debts since his liability will be discharged by the bankruptcy. Your husband can even discharge his obligations under an existing property settlement agreement.

Get Divorced Online

Related articles

What Happens to Chapter 13 During a Divorce?

A Chapter 13 bankruptcy filing isn’t a quick or simple procedure. You’re not eliminating your debts as you would in a ...

Can You File Bankruptcy on Bills Obtained in a Divorce Settlement?

Sharing the responsibility for paying bills is a fundamental part of most marriages. If a couple divorces, the parties ...

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 ...

Can I File for Bankruptcy With My Spouse If We Already Filed for Divorce?

You can file for bankruptcy with your spouse after you have filed for divorce as long as the divorce has not become ...

Browse by category
Ready to Begin? GET STARTED