I get questions from time to time about Connecticut bankruptcy and divorce. The questions usually fall into two categories. The timing of a bankruptcy filing and how divorce debts are impacted by a later divorce filing.
I do not recommend filing for bankruptcy and divorce at the same time. When a bankruptcy is filed, an “automatic stay” goes into effect. This stay essentially freezes your assets and property. So a divorce judge will not be able to divide assets while a bankruptcy is pending. Then your divorce case gets dragged out resulting in an emotional and financial mess. If spouses can cooperate with one another, bankruptcy first usually makes sense. But with divorce on the horizon I understand this is not always possible.
If the divorce is filed first, there must be consideration as to how a subsequent bankruptcy filing could screw things up. Divorcing couples tend to think more short term. Thinking long term makes sense here. The biggest issue pivots around what divorce orders could potentially be effected. More specifically consider what divorce debts can and cannot be discharged in bankruptcy.
Here is a short list of debts that cannot be discharged:
- Child Support
- Student Loans
- Attorney fees or guardian litem fees
- Court fines or penalties
- Fines or penalties to government agencies.
Beware of credit cards. These debts can be discharged. As part of your divorce, you have to know how the card is “held.” If you are only an “authorized user” you have have no liability to pay the card. However, with a jointly owned card both spouses are potentially responsible to the bank for the full amount. Not half the amount – the total balance. So if your ex discharges a joint card in bankruptcy the lender is coming for you.