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The intersection of bankruptcy and divorce

For the average American, visits to a lawyer's office may be rare. Car accidents, divorces and bankruptcies are likely to be among the most common reason they need to speak with an attorney. For some, there may be times when more than one of these needs coincide.

A common reason for a bankruptcy is a divorce. While many Americans encounter financial challenges every day in their marriages, a divorce can be a very destabilizing force. Even if both parties to the marriage have jobs, the creation of two households can cause numerous new expenses, such as renting apartments or one party's effort to buy the other party out of the family home, plus the added burden of child support costs that can create a tipping point.

Another issue is joint debt from the marriage. Your marriage dissolution is carried out by a contract between you and your former spouse. However, your contract does not alter the terms of the agreements that you make with lenders or financial institutions.

So, if your ex-spouse received a car as part of the divorce settlement, if the loan obligation was joint, should he or she fail to pay, the lender could demand you pay. If your former spouse filed for bankruptcy and obtained a discharge for that debt, the lender would certainly look to you for payment.

The same is true for joint credit cards, and if your former spouse had significant credit card debt, you should attempt to have that debt paid off prior to the completion of the divorce, because as with a car loan, if your ex-spouse files for bankruptcy, the collection agency would look to you to satisfy the debt.

Source:, "What Happens to My Debt If I Get a Divorce?" Leslie Tayne, June 23, 2015

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