Debt, Divorce and Bankruptcy

Many couples find themselves hopelessly underwater with their bills following a separation.  There are many reasons couple file for divorce and all are legitimate.  However, very few couples contemplate the financial repercussions of their divorce.  Yes, people think about their retirement, alimony and child support but very few talk about their budget moving forward. 

Once the parties separate and move into different homes, they move from one household budget to two.  Each moves from two incomes to one.  Financial troubles is one of the primary reasons couples divorce, but those financial are exacerbated by the process of divorce.  Sometimes debts, particularly unsecured debt, can fall through the cracks, as parties may have hard time figuring out who pays what.  Then, the parties have costs associated with a divorce.  Those can skyrocket when parties get into a mindset that they must "win" the divorce.  Oftentimes, we see parties deplete all of their resources in an effort to "win" the divorce.  An attorney friend likes to tell clients that they can approach the divorce in one of two ways, "You can put your kids through college, or you can put mine through college."

Bankruptcy can often put the parties back on track and eliminate one of the most contentious facets of divorce.  if the parties file together they can often eliminate the debt that keeps them from being able to support two new households.  For a spouse who has been "stay at home," this may allow them a fresh start as they look to start a new career without a cloud of debt looming over their head.  other times, we have had parties reconcile after recognizing that it was the tremendous debt driving the divorce not a lack of love. 

If parties find their resources stretched when they separate, bankruptcy is an option to explore even if it's a step they ultimately choose not to take.