If you are divorced and you have been notified that your ex is filing for bankruptcy protection, you are probably wondering how his or her filing will impact you. This can be particularly worrisome if your ex-spouse is liable for the majority of the marital debt under the divorce decree. Many clients contact us because they are concerned that creditors will start pursuing them to collect the debt.
To understand how your ex’s personal bankruptcy will impact you, it is important to understand that the automatic stay will immediately provide your ex with protection from creditors. The stay prohibits creditors from pursuing any collection efforts against your ex while the bankruptcy case is pending. Thus, most creditors will start reviewing their contracts to determine if any other parties (such as you) are liable on the debt.
Your ex will most likely be able to discharge or eliminate the majority of his or her debt, even those debts that your ex agreed to pay in the divorce agreement. Thus, if you remain liable on the marital debt (your name is still on the contract with the lender or creditor and you haven’t been released), you remain obligated to pay the debt. It is also important to understand that if you live in a community property state, it can impact how your ex’s bankruptcy may affect you.
You may be wondering why the divorce decree doesn’t protect you since it orders your ex to pay the marital debt. Unless your creditor agrees to modify the loan or release from the contract, your creditors are not bound by the divorce decree. As a result, if you were jointly liable for the debt prior to the divorce, the debt is still owed by both you and your ex after the divorce.
If your ex-spouse is planning to file a Chapter 7 or Chapter 13 case and you have a significant amount of joint debt, contact us for help. You may want to think about negotiating with the creditors to settle the debts or even consider filing your own bankruptcy case. Let our legal team review your individual finances and help you understand all of your available options.
Contact the Orange, Riverside and Alameda law firm of Fitzgerald & Campbell, California’s premier debtor protection law firm. We can work with you to create a debtor protection plan and can work to halt harassment and reduce and eliminate debt. Contact us for a consultation by calling (844) 431-3851 or emailing us at Info@debtorprotectors.com.