Filing bankruptcy is typically a result of one of three things: job loss, illness or divorce. More recently, the plummeting value of homes along with adjustable rate mortgages have contributed to increased filings. With more layoffs and pay cuts everyday, it's no wonder people who used to manage their bills are now in major crisis.
Insert financial crisis into any marriage and things become extremely difficult. Unfortunately many marriages don't survive this kind of stress, and many times couples who divorce end up in bankruptcy. A two-income household may have been able to support credit card debt, car loans and mortgage payments without a problem. With a divorce, each spouse is responsible for the expenses of a separate household with only one income. Oftentimes there isn't enough money to go around and bills go unpaid.
When one of the divorced spouses files bankruptcy, it almost always forces the other spouse to file as well. Family law courts attempt to divide debt and assets as fairly as possible, but frequently one spouse is ordered to pay debts he or she does not have the resources to pay. When the payments go into default, where does the creditor turn? Undoubtedly to the other spouse. Creditors don't care who was ordered to pay the debt in the divorce, and they are not bound by the family court order.
Couples who are planning for a divorce and have significant debt may want to look at bankruptcy as an option prior to divorce. While not a good fit for every situation, it can be more cost effective and alleviate the stress around dividing debts during the divorce.
Denise K. Aguilar is a local attorney whose practice focuses in consumer and small business bankruptcy. Denise can be reached at 480-455-1881 or 602-252-4991.