Robin Williams is known for making people laugh. Whether in his stand-up comedy routine or many of his acting roles, comedy has been a staple of Williams’ career. But Williams does not consider his finances a laughing matter, especially since he is having to downsize in order to avoid filing bankruptcy.
When should a husband and wife jointly file a bankruptcy? This question often comes up in bankruptcy forum websites and is a very legitimate concern for married people facing bankruptcy. Continue reading
Divorce can be a messy process. Aside from the emotional and relationship issues that going through a divorce creates, it can result in a number of financial issues and questions that you need to address as well. And if you throw creditors into the mix because one or both spouses are behind on their bills and you believe bankruptcy is an option that you should pursue, it can complicate the divorce proceedings even further.
So if you are considering divorce and believe you may need to file bankruptcy as well, following are some of the key points you should consider.
Need for Bankruptcy
When someone has financial issues, bankruptcy is a term that can come to mind quickly, perhaps too quickly. While bankruptcy can be a powerful and at times necessary tool to get a fresh start from a financial standpoint, it also has a long-term negative impact on your credit.
Therefore, you should keep in mind that there are alternatives that you should consider before considering bankruptcy. Although there are a number of organizations that advertise they will help people get out of debt who are actually in the business just to make a quick buck, there are legitimate companies and not-for-profit groups that you can discuss your situation with to help evaluate what all your options are.
While bankruptcy may be the way you need to go in the end, you should take time to consider other options first.
Types of Bankruptcy
If bankruptcy is necessary, keep in mind that there are two primary types of bankruptcy for individuals. Chapter 7 bankruptcy provides for the elimination of most types of debt. Chapter 13 bankruptcy allows a person to reorganize their debt through use of a payment plan.
A bankruptcy attorney can help you evaluate which type of bankruptcy is the right option for you given your situation, considering the types of debt you have and the implications the bankruptcy may have on the divorce proceedings.
If you and your spouse have debt that is in both of your names, keep in mind that if only one of you files bankruptcy, the other spouse will often still be responsible for paying the debt. While you declaring bankruptcy may keep creditors from pursuing you to collect the money owed, the creditors can (and very likely will) pursue your spouse for the money.
How are Disability Payments affected by Bankruptcy?
One of the strains in life that often leads to divorce is finances, when there just is not enough income to pay your creditors. This may be especially true if one spouse cannot work and is receiving disability payments such as Social Security.
But remember that if you are receiving Social Security benefits because of disability and you need to file bankruptcy, Congress has passed laws that protect those disability payments from Social Security from being at risk in the bankruptcy, because disability payments were deemed too necessary to someone in need maintaining a minimum standard of living. While there are a number of factors you should consider before filing for bankruptcy, you should not let fear that bankruptcy may take away your Social Security benefits be one of those factors.
Hiring a Bankruptcy Attorney
Remember the information above is general in nature and should not be considered legal advice. As noted at the start of this article, either divorce or bankruptcy on their own can be complicated, but when coupled together, they can be especially difficult to navigate. Therefore, if you are dealing with both of these situations, you should speak with a bankruptcy attorney who is familiar with the bankruptcy laws of your state and can evaluate your individual and unique situation in light of these laws. A bankruptcy attorney can help make sure your property is listed correctly so that your Social Security benefits and any other assets you have are viewed in the best possible light by the bankruptcy court.
- Bankruptcy Rules Changed in December of 2011 (betterbankruptcy.com)
- Taxes Due After a Discharged Bankruptcy (betterbankruptcy.com)
- Discharge of Debt in Bankruptcy? (betterbankruptcy.com)
- Bankruptcy and the Stress Experienced After Filing (betterbankruptcy.com)
Personal Bankruptcy Story
I just read on a bankruptcy forum website a very interesting personal bankruptcy story as told by a male whom has experienced a recent divorce but still shared a mortgage with his ex-wife and one with his daughter.
Here are some excerpts from his story: “I had a nasty end to a relationship last year, which is what led to completely bankrupting me. We owned a house together, and that person is living in the house and making the mortgage payments, which are current. I don’t want to lose the house…I am not sure if my bankruptcy will effect her credit or anything else. Do you? The equity in it is about $70k. If I understand everything correctly, I am allowed $60k in house equity, which my half in this house is $35k, so it should be exempt from the Chapter 7, correct?
My daughter was fortunate enough to buy a little townhouse about 6 years ago. My ex, daughter, and myself all are on the mortgage because my daughter did not have the credit to buy the townhouse. I have never made a payment and my daughter and roommates have always kept the mortgage payments current. There is about $20k equity in the house. Is my daughter in jeopardy if I file bankruptcy?”
Divorce and Bankruptcy
Federal bankruptcy courts are filled with people who are there because of financial difficulties that often result in a divorce. According to some statistics, it is most often the men that file bankruptcy after a divorce. Child and spousal support usually follow the men as well, and it is not uncommon for the male to move from the home, leaving the spouse and children with the shelter. Depending on the divorce decree, the male may have been mandated to pay support for sheltering his ex-wife and children. Divorce decrees before a bankruptcy can often muck up the whole bankruptcy process.
Not only does a male in this situation have to provide support for his ex-wife and children, he now has to provide for himself as well. In today’s society, many households are made up of two or more wage earners in order to survive. Therefore, a male who finds himself in the situation of a divorce can quickly find himself unable to make ends meet with his current job. Instead of moving up on the financial ladder of success, many times those who divorce, especially with children, move down the financial ladder. Debts come and job histories often turn sour.
Filing Bankruptcy May or May Not Be the Answer
In answer to the male’s questions in our illustration above, state or federal exemption laws will play a large role in determining whether or not his former homestead and the townhouse will stay in tact as is.
In this particular illustration, there is the potential for both homestead and townhouse being liquidated in a Chapter 7 bankruptcy. If this happens, the ex-wife’s credit and his daughter’s credit will be affected by both the bankruptcy and any foreclosure following, despite the fact both have been making their mortgage payments on time.
Depending on what bankruptcy court the male files will also play an important part in determining whether or not one or both housing units remain in tact. The best advice any layman can give a male in such a situation is to seek the legal advice of an experienced bankruptcy lawyer familiar with the Bankruptcy District in which you will file.
- Bankruptcy Discharged and Foreclosure Follows (betterbankruptcy.com)
- Community Property and Bankruptcy Laws (betterbankruptcy.com)
- In Debt, Filing Bankruptcy May Not Do These 4 Things For You (betterbankruptcy.com)
- A Quit Claim Deed and How Filing a Bankruptcy Might be Affected (betterbankruptcy.com)
If you have more debt than you can afford to pay, you may be evaluating if bankruptcy is an option you should pursue to alleviate the debt burden you are dealing with. After all, you have likely seen in the news various reports on the economic difficulties that many are experiencing and how bankruptcies are at an all-time high in helping people survive and mange their day-to-day expenses. But if part of your monthly expenses includes a payment for child support, there are some important factors you should consider when determining if bankruptcy will help alleviate your debt.
Child support is not dischargeable in bankruptcy
The simple fact of the matter is that child support cannot be eliminated through a Chapter 7 or Chapter 13 bankruptcy. This is because the United States legal system considers child support a right of the child and therefore it is in the interest of the public as a whole that a parent pays this money whatever the circumstances.
It does not matter whether it is the obligation to pay child support going forward or child support payments from the past that have not yet been paid. For either type of payment, bankruptcy laws do not allow someone to get free of making child support payments. It also does not matter what percentage of your total expenses is made up of child support payments: the child support payments will not be discharged in a bankruptcy.
In addition, payments “in the nature” of child support—that is, payments that directly go toward care of the child, such as payments you owe for medical care given to the child—are also exempt from being discharged in a bankruptcy.
There are two cases that some may call an “exception” to the dischargeability of child support, but they are not truly exceptions in that true child support payments are still always paid.
The first case is when a divorce court calls a payment child support but it is not truly “in the nature” of child support. A common example is payment of a mortgage for the parent who is caring for the child. While making the mortgage payment may be called child support by a divorce court, it is possible this payment could be discharged in a bankruptcy if it is not directly benefiting the child and therefore is not truly seen as child support.
The second case is when someone else takes on the responsibility for paying the child support on your behalf. Since the child is still receiving the support benefit from someone else, you may be able to discharge the child support payment from your list of obligations.
One final note: a bankruptcy may temporarily delay payment of child support, but the delay is only temporary. You will still have to pay the full amount of child support owed. In addition, while a bankruptcy can prevent creditors from contacting you while the bankruptcy is in process, action can be taken during a bankruptcy to ensure you keep making your child support payments.
Child support is factored into calculating the Chapter 7 means test and your debt to income ratio
If you are considering declaring Chapter 7 bankruptcy, you must pass the means test. The means test is a calculation that evaluates your income and expenses to ensure that you do not earn so much money that you are disqualified from receiving the benefit provided by declaring Chapter 7 bankruptcy.
Child support payments are one of the monthly expenses that should be included when calculating the means test. Therefore, if you are making a child support payment, it will increase your expenses and therefore make it more likely that you will qualify for Chapter 7 bankruptcy. But having to make child support payments is not a guarantee that you will qualify for Chapter 7 bankruptcy, as you may still earn so much money that you cannot pass the means test.
In addition, if you are calculating your debt-to-income ratio as a part of your bankruptcy, child support should be considered as a required debt in the calculation of expenses.
If my child support payments are not dischargeable, should I still declare bankruptcy?
The help provided to you by declaring bankruptcy will depend on your specific circumstances. Even though you will have to make your child support payments when declaring bankruptcy, a bankruptcy may still address other debt that will allow you to survive on your existing income. A bankruptcy attorney can evaluate your situation to determine if bankruptcy will help you.
Please complete the short form below to get help in answering this question. By completing the form, a bankruptcy attorney will review your situation free of charge and without further obligation to you. This review is 100% confidential and can help give you peace of mind that you are making the right decision for you regarding bankruptcy. So please get the help you need today.
The principal focus of modern bankruptcy legislation and business debt restructuring practice theoretically no longer rests on the elimination of insolvent entities but on the remodeling of the financial and organizational structure of debtors experiencing financial distress. This is done to permit the rehabilitation and continuation of their business, but in light of the recent economic downturn, the new 2005 bankruptcy laws are not necessarily working as designed. The Means Test was introduced to help the U.S. Bankruptcy Courts determine who might be truly insolvent and qualify for liquidation of assets through filing a Chapter 7.
A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A trustee that is appointed by the court will gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors. Most chapter 7 cases are “no-asset” cases, meaning you do not have any non-exempt property for the trustee to sell. When there is no assets, qualifying debts are forgiven to the debtor.
The laws passed through the years to balance the older laws favoring creditors have basically been designed to help honest debtors get back on their feet to be productive citizens. The key word here is “honest.” Bankruptcy fraud is a crime. While difficult to generalize across legal entities, common criminal acts under bankruptcy laws typically involve concealment of assets, concealment or destruction of documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing. Falsifications on bankruptcy forms often constitute perjury. The new bankruptcy laws which are more generous to honest debtors were never intended to allow deadbeats and criminals to have a loop hole in order to beat their debts.
We can and often find the criminals, but who are the deadbeats in our society? Elizabeth Warren, Teresa A. Sullivan, and Jay Lawrence Westbrook partially addressed this situation in the book they published in 2001, The Fragile Middle Class: Americans in Debt. The authors of this book analyzed court records and demographic data on thousands of bankruptcy cases, as well as debtors’ own accounts of the reasons for their bankruptcies. In a nutshell, they concluded: “The average age of the filer is 38 years old; 26% of them are men who file alone; 30% of them are women who file alone; 44% of the filers are couples; 67% of the filers have lost a job; half have experienced a serious health problem; overall, they are slightly better educated than the general population; and fewer than 9% have not suffered a job loss, medical event or divorce.”
That last observation listed by this group of social and legal experts means that over 90% of bankruptcy filings are traceable to job loss, illness, or divorce, and these factors are largely out of anyone’s control. This doesn’t sound anything like what I thought a deadbeat might be.
The Merriam-Webster online dictionary defines the adjective, deadbeat, as a loafer; one who consistently fails to pay personal debts or expenses. The dictionary uses such illuminating synonyms as couch potato, lazybones, do-nothing, drone, idler, layabout, loafer, lotus-eater, slouch, slug, slugabed, and sluggard as descriptions for the use of the word, deadbeat. Certainly, Americans who file for bankruptcy cannot pay their personal debts or expenses, but there are usually extenuating circumstances why they can’t, just as the book implies. One thing most of the Americans who file for bankruptcy are not, and that is a deadbeat.
There is no easy way out of a bad financial situation. They can happen to anyone, and the way out of them amounts to a lot of hard work and determination to overcome. Maybe you have found yourself in a difficult financial situation, and you are considering bankruptcy as an option. Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation. If you determine you are in need of relief from the stress associated with debt and you live in or around the metropolitan area of Scranton, Wilkes-Barre, or Hazleton, Pennsylvania, contact us today at www.BankruptcyHome.com . We will help you find a bankruptcy attorney in your area that will help you with any questions you may have on bankruptcy law.