Divorce affects everything from everyday life to planning a vacation. One of the most prominent effects it has on your life is hurting your financial situation. Between the division of assets, legal fees and change in income, your bank account takes a big hit.
Is the inevitable result filing for bankruptcy? After all, the most common causes of bankruptcy are unexpected financial losses, not extravagant spending. With divorce being a huge life-changing event, it would make sense that it would lead to another one.
Correlation between divorce and bankruptcy
There is no question that there is a link between the two. Some professionals believe the cause of the relationship is the financial toll divorce takes. Others think the decreased stigma of divorce has affected social attitudes toward bankruptcy, making those who are willing to end marital contracts likelier to bail out of financial obligations as well. Regardless of the reason, the risk of bankruptcy does exist. However, you can mitigate this risk by hiring a certified divorce financial planner during the divorce process.
Effects of divorce on bankruptcy
If either of you files for bankruptcy after your split, it can still affect the other spouse. Although child support and alimony are not dischargeable debts, the payment amounts can decrease. You may be responsible for any debt your spouse does not pay if you are a joint owner of the account or a cosigner of the contract. You may also lose the assets you fought hard to keep in the divorce.
Responding to the possibility of bankruptcy
What should you do if you face the possibility of bankruptcy? The best thing to do is speak to an attorney about your options. Chapter 7 can give you a fresh start, and Chapter 13 can help you retain assets. The right choice depends on your circumstances. If your divorce is not final yet, you may want to consider putting it on hold and filing for bankruptcy first.