Wedding vows usually include a promise that the couple will remain together until death. This is a very romantic sentiment. But it is not realistic for most marital relationships. Romantic relationships — and marriages specifically — can end for a variety of reasons.

More than 800,000 people go through the divorce process in the United States each year. Divorce is very common, and there should not be any stigma surrounding it. Still, divorce can be an emotionally difficult process.

Even the most amicable divorces involve emotional challenges, frustrations, and complex legal processes. Couples with children may also have to deal with custody and child support decisions. Some people choose to file for bankruptcy after their divorce.

If you are facing financial difficulties after a marriage, filing for bankruptcy could be your best option. In the following article, we will examine everything you need to know about filing for bankruptcy after divorce. 

Why People File for Bankruptcy After Divorce 

People file for bankruptcy for a wide variety of reasons. This is also true for couples involved in a divorce. Many times, people are accustomed to living in a two-income household. A divorce usually entails a transition to a single income.

For example, perhaps you are used to splitting bills and expenses with a spouse. Maybe you shared a single vehicle with your spouse. Paying the costs of living alone can present a financial strain.

Sometimes, a person’s ex-spouse will have accrued large amounts of debt during the marriage. This can leave an individual responsible for debts that they did not personally take on. 

If your ex-spouse took on a large amount of debt in your name, bankruptcy might be an advantageous step after a divorce.

Common Types of Bankruptcy

Bankruptcy offers financially insolvent people the ability to pay back their debts. It also allows people to become financially stable with the help of a federal program. 

The two primary types of bankruptcy for individuals include:

Chapter 7 Bankruptcy

This type of bankruptcy is also called “liquidation bankruptcy.” In order to qualify for Chapter 7 bankruptcy, the bank requires the person to liquidate some of their assets. 

The filer then uses this liquid capital to pay back their debts. In exchange for selling their assets, the filer’s unsecured debts are completely forgiven. Unsecured debts can include medical debts, credit card debts, and other personal debts. 

Some people do not qualify for this type of bankruptcy. If you have sufficient income to develop a repayment plan, you may only be eligible for Chapter 13 bankruptcy. 

If you are unsure about your financial situation, it is best to speak with a qualified bankruptcy attorney to explore all of your options.

Chapter 13 Bankruptcy

While Chapter 7 bankruptcy requires the liquidation of assets, Chapter 13 does not. Chapter 13 is also known as “reorganization” bankruptcy. 

Under this type of bankruptcy, the filer develops a plan to pay back their debts in monthly installments. The debtor is not required to liquidate their assets. Typically, repayment plans under Chapter 13 range from 3-5 years. 

Following the repayment period, all of the remaining debts that the filer holds are discharged. 

Automatic Stay

After you file for bankruptcy, your assets will be under an injunction known as an “automatic stay.” This means that most of your assets cannot be repossessed. Also, you will be protected from most lawsuits. 

While this sounds good, the stay also has the potential to impact your divorce proceedings. If your divorce is not finalized, determinations about marital property might be affected by the automatic stay. 

The Effects of Filing for Bankruptcy

For people with a significant amount of debt, filing for bankruptcy after a divorce might be the best option. However, bankruptcy should not be taken lightly. It is not a “get out of debt free” strategy.

There are some downsides to filing for bankruptcy. If you are going through a divorce, consider both the advantages and disadvantages of bankruptcy as a financial strategy.

The Impact on Your Credit Score

One of the most significant impacts of filing for bankruptcy after a divorce is its effect on your credit score. Having a bankruptcy on your financial record can influence your credit score for up to a decade.

A low credit score can make it difficult to open new lines of credit, secure car loans, or buy a house. There are ways to build your credit score back following bankruptcy, but it takes time. You can take out a credit-building loan or open a secured credit card to increase your credit score. 

While the damage to your credit score will not be permanent, you should consider this element of bankruptcy before deciding to file. 

Remaining Debt

Bankruptcy is not a simple solution for every type of debt. For example, outstanding tax debt and student loan debt will not be forgiven when you file for bankruptcy. This is true whether you file for Chapter 7 or Chapter 13 bankruptcy. 

Additionally, child support debt is not affected when you declare bankruptcy. 

The Effects of Bankruptcy on Your Ex-Spouse 

If you declare bankruptcy following a divorce, it might affect your ex-spouse’s financial situation in a number of ways. The effects will depend on how the marital property is divided.

Some of the effects that you will incur after filing for bankruptcy will not affect your ex-spouse at all. For instance, your ex’s credit score will not be impacted if you file for bankruptcy. 

It is also important to note that your bankruptcy cannot be used to forgive your ex-spouse’s debts. This is true even if you had joint debt. In fact, your ex-spouse may be liable for the entire amount of your joint debt following your bankruptcy.  

Securing Representation from a Bankruptcy Attorney 

No divorce is easy. A divorce can be especially challenging if you or your ex-spouse are facing financial difficulties. If you are considering bankruptcy after a divorce, working with a qualified bankruptcy attorney can protect your interests.