Divorce is a difficult and draining process. Depending upon the level of animosity involved and the goals of each party, it can also be extremely financially draining. As bad as the divorce itself can be, the aftermath can be just as bad if certain matters are not addressed fully and properly at the time of the divorce itself. Issues of custody and parenting time, support, and debt can cause parties to be forced to go back to court again and again after the divorce is over, fighting and spending yet more money on lawyers to address things which could have and frequently should have been handled at the time of the divorce itself. One of these items which can be addressed much more easily at the time of the divorce or even before the divorce as opposed to after the divorce is the issue of debts and how they will be paid.
Frequently, couples opt to settle all of the issues contained within their divorce by way of what we call a “Marital Settlement Agreement” instead of going through a trial. The court always likes it when people can solve their own issues with help of their counsel. It saves time and money and helps everyone move forward sooner rather than later. A Marital Settlement Agreement is a large document which tells the parties and the court how each and every issue between a married couple is going to be divided in their divorce and which party has which rights and responsibilities in moving forward. One of the issues handled in such a document is the parties’ debts. Frequently, people agree to “split up” their debts in a certain way when they get divorced. Husband “takes” this joint credit card debt and wife “takes” this one. The parties agree to each be responsible for paying the cards they accept as their portion of the marital debt. Usually each party agrees to “indemnify and hold harmless” the other party with regard to the debt they agree to “take” and pay after the divorce.
Sounds great, right? Well, sometimes it is and sometimes it isn’t. An agreement, regardless of the type of agreement, is just a piece of paper. The other party can have whatever responsibility he or she agrees to have in that agreement, but when they do not hold up their end of the bargain, the agreement must be enforced. This means that someone needs to once again hire an attorney, file a motion, and get a judgment in their favor. Then they need to enforce that judgment. And that will once again require, you guessed it, hiring and paying an attorney to get what you are already entitled to. One of the most frequent “post judgment” motions we family law attorneys deal with for our clients is the issue of the other party not paying certain debts that they agreed to pay. Their non-payment of things like a credit card bill or a tax debt leads to collections actions against their former spouse and can cause credit damage, legal fees, garnishment of wages, and levies against bank accounts. These motions can be nightmares for the aggrieved party, who is already struggling to pay their bills following a painful and expensive divorce.
One solution to these issues is for couples to cooperate one last time for the benefit of one another and for their children, if they have any, by way of a properly filed bankruptcy prior to the filing of a Complaint for Divorce. In many cases, it is much more cost effective and realistic for a couple to file a joint Chapter 7 or even Chapter 13 bankruptcy before they file for divorce, discharging large amounts of their shared marital debt in the process. In this manner, they can simply discharge all of their non-secured debt like credit cards in one fell swoop and for one shared fee prior to their divorce. Doing things this way means there is no need for expensive fighting over who spent what where on what card or who should pay for it after the divorce. The debt discharged might even include the house if their home is underwater. Discharging the mortgage debt and surrendering a home which is underwater to the bank might be able to grant a husband or wife the ability to stay in a home for a year or longer after a divorce without paying any mortgage, something which can free up a lot of money to help with the children and with moving forward in looking for a new place to live following a divorce. It can also keep both parties from being saddled with credit card debt that neither one of them can truly afford to pay now that their two incomes have been split from one another.
Bankruptcy might not be the best option for every divorcing couple. The incomes of the parties, the types of debts they hold, when the debts were accumulated, the amount of equity in the marital home, and even the effect on the credit score of one or both of them might place one or both parties in a situation where a bankruptcy is not feasible. But in many cases it is an option which should be discussed and which may provide enough mutual financial benefit and breathing room to allow a divorce to be much less contentious. At Simoni Law Office, we handle our family law matters comprehensively, and these are the sorts of potential options and solutions we discuss with our clients. Whether you are thinking about a divorce, a bankruptcy, or perhaps both, we are here to talk with you about your options. Call anytime for a free, no obligation, and confidential consultation with Jeffrey Kerstetter to talk about your legal matter.
Jeffrey A. Kerstetter, Esquire