Divorce and Bankruptcy

If individuals are headed into a divorce and have a lot of debt, filing for bankruptcy should be done prior to starting the divorce proceedings. Bankruptcy has a way of simplifying a divorce, aid in settling how all remaining debts are divided, and offer protection from the possibility of the soon-to-be ex spouse if they file for divorce later one.

When one spouse or both file for bankruptcy, all community property, that is all property that was purchased during the time of the marriage, is part of the bankruptcy estate. This means it can be utilized to pay debts. Once bankruptcy has been filed, the court orders an automatic stay to prohibit creditors from collecting on any current debt. However, it does not stop an individual from asking the court handling the divorce to order the ex to pay alimony and/or child support.

Once the bankruptcy court determines what property is exempt from being used to pay off all the debts, the divorce court is able to go ahead in dividing up that property. Property that is exempted from bankruptcy court is dictated by federal law as well as specific laws in the state of Florida. Common exemptions from bankruptcy include the home, an automobile, and a certain quantity of household goods as well as clothing.

Most divorce settlements have a special indemnity, or hold harmless, clause to protect an individual. It requires that a spouse pay certain debts or repay their ex if a creditor makes the ex pay the debt. If the former spouse files bankruptcy later on, the ex can inquire with the bankruptcy court to enforce this agreement.