Divorce can put people in a dire financial situation with little resources to draw upon. As a solution to unexpected or overwhelming debts related to divorce, people may consider filing for bankruptcy.
When leveraged the right way, bankruptcy can provide a fresh start. However, people should understand which debts remain their responsibility even after they reach a settlement.
Many times, courts require couples to split any shared assets. Similarly, most courts require couples to split outstanding debts as well. Depending on the divorce settlement, divorcees could walk away with individual obligations to pay debts related to mortgages, vehicle payments, business loans and credit card balances. Particularly for individuals who may have previously managed a home and have not worked for some time, taking on such financial obligations could cause immense financial strain.
For debts such as these, divorcees may benefit from filing for bankruptcy. This strategy may enable them to clear some of those debts so they can focus on their future. However, according to the United States Bankruptcy Court Middle District of Florida, other, non-dischargeable debts include the following:
- Spousal support
- Child support
- Legal fines
- Some taxes
One of the best things people can do in the face of bankruptcy and divorce is to put together a budget. Carefully assessing income, expenses and unexpected events can help people determine how to use their money. Budgeting for divorce-related expenses can help people plan accordingly to avoid legal trouble. According to U.S. News, prior to seeking any new loans, people should compare a potential loan with their current budget to determine if they can feasibly make payments.
Even though divorce and bankruptcy can substantially affect a person’s finances, careful planning can optimize both circumstances to minimize negative impacts.