Learning that your ex-spouse is filing for bankruptcy can cause some anxiety. Certainly that’s true if you’re still tied to them financially in any way.
Let’s look at some ways in which an ex’s bankruptcy could potentially affect you.
Child and spousal support
The good news is that neither of these types of support obligations can be discharged in bankruptcy. However, if your ex’s financial situation has taken a considerable downturn, they may be able to seek a modification to their support orders. Be prepared for that.
Shared credit
If you didn’t completely separate your credit cards, loans and other debts in the divorce and your name is still on any of them with your ex, even as a co-signer, creditors can come to you for repayment. Even if your ex committed to repaying their debts in the divorce agreement, that won’t matter to the parties still owed money if your name is on the accounts.
Joint property
Typically, a primary residence is exempt from being sold in bankruptcy. However, if your ex still co-owns the home you’re living in or rental or investment property with you, it’s possible that could be liquidated to help repay your ex’s debts. You could get reimbursed for whatever portion you still own, but you won’t have the property.
What if they file Chapter 13 bankruptcy?
Typically, this will put you at less risk of having to repay any joint debts because Chapter 13 requires the bankruptcy filer to develop a repayment plan rather than give up property. If they don’t adhere to that plan, however, creditors can still potentially come after you to get their money.
Having legal guidance is key to protecting your interests
You can see why making a total financial break from your spouse – at least involving any shared assets or debts — during divorce can save you problems in the future. If you’re finding that your spouse has significant debts during divorce or you fear that their ineptitude with money is only going to worsen once you’re no longer married, it’s crucial to take steps to protect yourself.
If you’re already divorced and learning of your ex’s bankruptcy, protecting your own financial well-being is also critical. Whichever situation you’re in, don’t go it alone. Having experienced legal guidance can make a big difference to your future.
