Divorce and bankruptcy are two legal processes that can greatly impact an individual’s life, and when they intersect, confusion and uncertainty can arise. Understanding how Minnesota’s divorce and bankruptcy laws interact is crucial if you are going through a divorce and contemplating bankruptcy.
Bankruptcy and Divorce: Which Comes First?
The question of whether to initiate bankruptcy or divorce first is a common concern for those considering both processes. While there is no one-size-fits-all answer, several factors should be taken into account.
Filing Bankruptcy Before Divorce
One viable reason to file for bankruptcy before divorce is its potential to reduce the overall cost of the divorce proceedings. Divorces can be financially burdensome, especially when couples cannot reach mutual agreements on key issues.
Eliminating or reducing debt through bankruptcy before divorce can help you avoid contentious financial disputes in court. Furthermore, bankruptcy offers a fresh start and empowers you to regain control over your finances.
Filing Divorce Before Bankruptcy
In certain situations, initiating the divorce process first may be more appropriate, particularly if your income disqualifies you from filing for Chapter 7 bankruptcy. Filing for Chapter 7 bankruptcy with a high income may result in case dismissal or the requirement to repay some debts.
Additionally, if you file for bankruptcy before divorce and your debts are discharged, your ex-spouse may become responsible for paying your share of the debts if they served as co-signers.
Property Division in Divorce and Bankruptcy
The court determines which assets and liabilities are exempt and non-exempt when filing for bankruptcy. Non-exempt property can be sold to repay outstanding debts.
During divorce, property division laws dictate the distribution of marital property between spouses, with certain exceptions.
Bankruptcy and Marital Property
In Chapter 7 bankruptcy, non-exempt marital property may be sold to satisfy creditors, sometimes including assets that would have been distributed to a spouse in the divorce.
In Chapter 13 bankruptcy, you can retain all your property, including non-exempt marital property, by repaying your debts over time.
Divorce and Marital Property
In divorce proceedings, the court may assign specific assets and debts to each spouse based partly on their contributions towards acquiring said property and other relevant factors.
However, if one spouse files for bankruptcy prior to divorce, the property division process may become more complex. The bankruptcy court may gain jurisdiction over marital property, and it could be sold to satisfy creditors.
Spousal Support and Child Support in Bankruptcy and Divorce
Bankruptcy and divorce can impact spousal support and child support payments. Spousal support, also known as alimony, refers to post-divorce payments from one spouse to the other. Child support entails financial assistance provided by the non-custodial parent to support their child’s care.
Bankruptcy and Support Payments
Both Chapter 7 and Chapter 13 bankruptcies prohibit the discharge of spousal support and child support obligations. However, filing for bankruptcy can alleviate other debts, potentially making it easier to meet support payment obligations.
Divorce and Support Payments
During divorce, the court may order one spouse to provide spousal and/or child support to the other based on various factors, such as each spouse’s income, expenses, and the needs of the children involved.
If one spouse files for bankruptcy after support payments have been ordered, the obligation to pay support will remain undischarged but may be subject to court-ordered modifications.
Conclusion
The confluence of bankruptcy and divorce can impose significant stress and upheaval in one’s life. In order to make informed decisions that safeguard both your rights and financial well-being, comprehending how these intricacies of Minnesota’s legal system operate is essential.
If you are contemplating filing for bankruptcy and/or divorce, it is highly recommended to seek guidance from both a divorce attorney and a bankruptcy attorney. By doing so, you can sail through these convoluted legal matters, ensuring the most favorable outcomes tailored to your unique circumstances.