Financial distress between spouses can lead to marital distress, which can lead to divorce.
In the divorce process, each spouse is assigned responsibility for certain marital debts. You might think that the debts assigned to your ex are their responsibility alone, but if your ex defaults on their debts and files for bankruptcy can it affect you?
Defaulting on marital debts
First, it is important to recognize that a creditor is not bound by your divorce decree. Your divorce decree is essentially a contract between you and your ex that dissolves your marriage. Your lender is not a party to this contract.
Since your lender is not bound by your divorce decree, if you remain a cosigner on a debt assigned to your spouse, then you are technically also responsible for ensuring the debt is paid.
Depending on the situation, Florida law might even hold you responsible for your ex’s debt that you are not necessarily a cosigner to. This is important if your ex files for bankruptcy due to unpaid debts.
Bankruptcy and marital debts
The effect your ex’s bankruptcy will have on you depends on the type of bankruptcy they filed for.
If your ex filed for Chapter 13 bankruptcy, you might be off the hook for the repayment of marital debts. In a Chapter 13 bankruptcy, your ex will be following a monthly payment plan to pay back debts owed, including the marital debts they are responsible for.
But things are different if your ex files for Chapter 7 bankruptcy. In a Chapter 7 bankruptcy some marital debts might not be eligible for cancellation under Florida law. This means the lender can seek repayment from you as a cosigner.
Even if a debt is discharged, if you are the co-signer, the lender might be able to go after you for repayment on what is still owed.
Of course, a good way to avoid being liable for your ex’s debts is to have your name removed as a cosigner to the debt as soon as you can after your divorce is settled.
In addition, you might be able to seek repayment from your ex in court based on the terms of your divorce decree after your ex’s bankruptcy is finalized.
Finally, rest assured that domestic support obligations cannot be discharged through bankruptcy. You will still be paid the child support and alimony you are owed, even if your ex files for bankruptcy.