Money problems are a big source of strain in both marriage and divorce. Many people face tough decisions when unexpected circumstances arise. While filing for bankruptcy can be a great tool for resolving debt troubles, there are additional considerations to be made when filing in either marriage or after a divorce.

Bankruptcy In Marriage

The biggest decision to be made when filing for bankruptcy in marriage is whether to file together or separately. Filing together means that both spouses will file jointly, both claiming debt liability and asset protection under bankruptcy laws. Filing separately means that only one spouse will claim liability and protection under bankruptcy, which can leave the non-filing spouse in a vulnerable position if not handled carefully. Which type of filing is best basically depends on the status of the debts. If the bulk of the debts were acquired together in marriage, or are shared debts, then filing together may be the best solution. However, if one spouse owns the majority of the debts, or accumulated the debts prior to marriage, filing separately may the better solution.

The advantages to filing together in marriage is that both spouses are protected from creditors, debt collection actions and the risk of asset seizure or liquidation. Not only will both spouses be protected under bankruptcy, but the mutual debts will be resolved with little chance of further collections from creditors. However, filing together does mean that both spouses will suffer credit consequences for the delinquent debts and both will have the bankruptcy indicated on their credit report. The advantage of filing separately in marriage is the avoidance of damaging the non-liable spouses credit due to delinquency on a debt owned by the filing spouse. However, filing together does leave the non-filing spouse vulnerable to creditors if they decide to pursue collections following the discharge of the other spouse. This means that the non-filing spouse could be subject to credit collections on a debt they are not liable for, but still legally eligible to be collected.

Bankruptcy After A Divorce

The biggest challenge in filing for bankruptcy after a divorce relates to how debts and assets were divided in the divorce. If there were any debts that were left undivided, both individuals can be pursued by creditors for full liability over the owed debt. This means that if one individual files for bankruptcy on the debts, the non-filing spouse can be held solely liable by creditors for the debt. Further, any assets that were divided to the non-filing spouse may also be at risk for seizure or liquidation. Having the debt and assets divided clearly in the divorce decree is the best way to avoid unnecessary consequences to the non-filing spouse after a divorce.