Divorce, Credit Card Debt, and a Chapter 7 Bankruptcy

When my sister divorced, she settled for a lot of her former spouse’s credit card debt in the divorce decree. Now having too much debt for her single salary to ever completely pay off the principal with interest, she had to file for bankruptcy protection. In her case, she filed a chapter 13 bankruptcy to satisfy the divorce decree in paying the debts and because she had a certain amount of non-exempt assets she needed to protect. What about those of you who inherit credit card debt from a divorce and qualify for filing a chapter 7 bankruptcy?

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Divorce and Chapter 7 Bankruptcy

Qualifying for a Chapter 7 Bankruptcy

If you do not have too many assets to protect, your income is below the median income for a family of your size within the area in which you live, and/or you can pass the means test, you can choose to file a chapter 7 bankruptcy.

Qualifying to file a chapter 7 bankruptcy is one thing. Choosing to file the bankruptcy is an entirely different thing.

Choosing to File a Chapter 7 Bankruptcy

If you have debts you cannot timely make interest payments on while reducing the principal amount of the debt within a five year period, and/or you cannot continue to make payments on all normal and reasonable living expenses, you may be bankrupt. If you are bankrupt, you may want to choose to consider filing for bankruptcy protection.

Choosing to file for a chapter 7 bankruptcy is one of the bankruptcy options you have for filing if you qualify. Divorce and credit card debt can have profound effects on determining whether you file bankruptcy.

Divorce and Credit Card Debt in Chapter 7 Bankruptcy

When you divorce, you are given a divorce decree by the divorce court that must be honored in order to solve the various disputes that might arise over division of the assets obtained during a marriage. A divorce decree is normally final, and a bankruptcy court cannot normally override any portion of the decree. That means the decree of a divorce may often effect what happens in a bankruptcy case.

For instance, credit can be obtained by each spouse individually or jointly in a marriage. If a divorce court decrees you are responsible for all the debts of a jointly-owned credit card, how does filing a chapter 7 bankruptcy handle discharging this type of debt?

If you file for a chapter 7 bankruptcy as an individual after divorcing, only your individual debts may be discharged, not your spouse’s debts. In the case of the above illustration, your half of the debts might be discharged, but your spouse’s debts you were decreed by the divorce court to pay will not be discharged in the bankruptcy. You will still most likely be responsible for paying those debts even though they were jointly incurred by you and your former spouse.

Filing a Chapter 7 Bankruptcy Requires Serious Self Examination

Many things can complicate bankruptcy filings. A serious self examination concerning your situation and bankruptcy laws should be made before you decide to file bankruptcy. A chapter 7 bankruptcy, the simplest bankruptcy to file, may require you to invest time in speaking with a qualified bankruptcy attorney in your area to determine why, how, and when you might want to file.



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