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Filing for divorce and bankruptcy? What you need to know

One unfortunate consequence of a divorce is that sometimes one or both spouses experiences financial crises that can lead them to the brink of bankruptcy. If you find yourself in similar circumstances where you are contemplating both divorce and bankruptcy in New York, it's important to understand that timing is essential for the best outcome.

You need to be completely honest with your family law attorney about your financial situation, as if a bankruptcy is imminent, he or she may need to coordinate the timing of the filing of pleadings with your bankruptcy attorney.

It can be beneficial for the divorcing spouses to file bankruptcy jointly prior to finalizing their divorce. This is especially important if a large portion of the debt obligations are jointly owed.

As creditors are not considered to be parties to divorce agreements, ex-spouses still will be responsible for repayment of joint debts, even when one spouse declares bankruptcy. If your spouse files for bankruptcy but you don't he or she can walk away from the debt, leaving you stuck with the bills. Filing a joint bankruptcy can avoid this scenario, as well as the hassles of dividing up debts in your divorce settlement.

Filing bankruptcy proceedings isn't the answer to every problem and won't wipe out certain debts, including:

-- Student loans

-- Child support arrearages

-- Alimony

-- Back taxes

But for couples looking to start fresh with a clean slate, it can help them meet this goal. Before filing either for bankruptcy or divorce, make sure that you provide full disclosure to both attorneys you have retained in the matters so the filings can be coordinated to be most beneficial to you.

Source: WomansDivorce.com, "When Divorce and Bankruptcy Collide," accessed Jan. 20, 2016

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