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Proper planning is needed when divorce and bankruptcy mix

Sometimes married couples find themselves in conflict over finances, which can ultimately lead to filing for a divorce. In such an eventuality, bankruptcy can be a mechanism to help each party deal with the money issues pertinent to divorce. Divorce and bankruptcy by themselves can be complicated processes; when they are combined, there are many more complications that can result.

As you are going through a divorce, you want to make sure you know exactly how the money issues are being handled. For instance, who will be responsible for any outstanding credit card debt? Who will be responsible for paying the mortgage? Perhaps you just lost your job and you may not be able to afford to pay the child support payments. These are extremely important questions that must be answered in both the divorce settlement and in a bankruptcy proceeding.

The following three things are important to keep in mind when dealing with a divorce and bankruptcy together:

  • First, child support and alimony cannot be discharged under a bankruptcy. In other words, bankruptcy is not a valid legal excuse for missing support and alimony payments.
  • Second, equitable distribution debts cannot be discharged under a Chapter 7 bankruptcy, only a Chapter 13.
  • Third, a creditor may seek payment on a debt from either spouse regardless of what the divorce decree states.

In the end, the federal bankruptcy code has certain laws which may trump New Jersey's divorce statutes. Anytime an event stretches beyond one legal area, many more questions are presented. It would be very wise to consult with an experienced bankruptcy attorney who can help you sort out this major event in your life.

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