Love and Marriage, Debt and Divorce

Two individuals recently consulted with me, both whom had waited too late to speak with a bankruptcy attorney.  One had recently married, one had recently divorced.  Both of them had substantial debt that they needed to erase to create a fresh start for their financial life.  Unfortunately, by waiting to file their bankruptcy until after marriage and divorce, they had created serious legal problems.   Here’s why.

The divorcee had a marital settlement agreement that required payment of substantial credit card debt that had been accumulated by both spouses during the marriage.  If a chapter 7 bankruptcy had been done before the divorce, this debt would have been easily discharged for both the husband and wife.

However, by placing the debt in a marital settlement agreement, this man created a serious obstacle to eliminating the burden of this credit card debt.  That is because the bankruptcy code does not allow (except in very rare situations) obligations in marital settlement agreements to be discharged or avoided in a bankruptcy proceeding.  While this man’s obligations to the  credit card companies can still be discharged, his obligations under the marital settlement agreement cannot.

Once he is discharged, the credit card companies will enforce the jointly acquired debt against his ex-wife,  and she in turn will enforce his obligation to pay under the marital settlement agreement.  The only way he will be able to eliminate this debt obligation is to convince his ex-wife to also file for bankruptcy.  If she refuses to do that, he is stuck paying the debt.

The married client had a different problem.  She had accumulated substantial debt before her marriage.  If she had filed for bankruptcy before marrying, she would have qualified for a chapter 7 bankruptcy because her income was lower than the median income for the State of Florida.   However, her new husband has a substantially higher income.

The bankruptcy laws required that this income be considered by the bankruptcy court to determine whether a debtor can use chapter 7 as a method for discharging debt.  Unfortunately, she disqualified herself from chapter 7 relief by marrying a wealthier man.

Central Florida couples with substantial debt who are considering divorce should first consult with an Orlando bankruptcy attorney.  In most cases, the discharge of substantial credit card debt, or other types of debt, can make for an easier and less costly divorce.

This makes for a true “fresh start” for divorcees, who can begin a new life without financial burdens trailing behind them into new relationships.  Any resident of Central Florida with substantial debt who is considering marriage should also seek the advice of a bankruptcy attorney in Orlando, and do so before, not after, “tying the knot.”


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