I received an interesting question from a divorce lawyer:
I just filed a divorce complaint for a client. Her husband is talking to a bankruptcy attorney about filing for bankruptcy. He probably will not fit into a Chapter 7. Is there any reason that my client should file jointly with him or hold off the divorce? Thanks.
Here is my response: Sometimes it does make sense for a divorcing couple to file a joint bankruptcy. If there is a lot of joint debt, a joint case can allow them to get rid of debt, surrender a house or motor vehicles, and cancel leases and other executory contracts.
In a Chapter 13, the divorcing couple would have to demonstrate that even with two households the proposed budget would allow for a trustee payment. Further, if one spouse or the other is keeping certain property, the Chapter 13 payment would have to be allocated and both parties agree to a division of the trustee payment obligation. As you might imagine keeping a joint 13 alive months or years after a divorce can be difficult.
I would also look at this case in terms of what might happen if the parties go ahead with the divorce and your client’s ex-spouse files his own bankruptcy. Would your client get stuck with joint credit card bills, a vehicle, tax debt?
In general I am not a big fan of a jointly filed case by divorcing spouses. However, I do think that it might be worthwhile for your client to consult with a bankruptcy lawyer to run through the different scenarios. You, as the wife’s lawyer, would benefit from knowing what might happen if the husband files his own case down the road so that you can include provisions in the divorce agreement that would protect her interests.
[tags] divorce and bankruptcy, joint bankruptcy filing by divorcing spouses [/tags]