Getting divorced in Wisconsin means accepting a lot of significant changes. Most people understand this and look forward to making lifestyle transitions, such as starting new relationships, pursuing career advancement and escaping abusive situations. Sadly, few are prepared for how their divorces might impact their debts.
What will happen to your debts after you split? Can seeking bankruptcy protection help you manage your obligations more effectively? Keep reading for the essential facts on shared liabilities, bankruptcy and divorce debt consolidation.
Divorce and Debt
When people get divorced, they naturally consider their assets. They also need to think about their liabilities because they may be held responsible for their spouses’ actions even after parting ways.
Key Marriage Debt Concepts in Wisconsin
The notion of community property, or assets acquired during a marriage and deemed to belong to both spouses equally, also applies to certain debts. Important concepts to understand include
- The doctrine of necessaries, a law permitting creditors to collect certain kinds of debts from an indebted person’s spouse, and
- The determination date, or the earliest date that falls after when you got married and both took up in-state residency.
Why Your Determination Date Matters
When judging debt matters, courts may take distinct approaches depending on when specific debts were incurred relative to the determination date. For instance, pre-determination-date obligations frequently result in creditors collecting separate property from an indebted spouse. They can also take marital property that would have belonged solely to one spouse if they’d never tied the knot.
Normal creditors can’t collect community property to resolve pre-determination-date debts. The IRS has no such limitations, however, so tread carefully.
What about creditor claims that you acquired after getting married and moving to Wisconsin with your spouse? These liabilities may include debts that you took on in your family’s interest as well as those you incurred for personal reasons:
- When debts relate to family purposes, creditors can collect from the indebted spouse’s separate property and any marital property they share.
- With non-family purpose debts, creditors can take a debtor’s personal property as well as half of their marital assets.
Exploring Your Divorce Debt Consolidation Options
Getting divorced is all about moving on with your life, but dealing with your ex’s debt can make cutting the tether much harder. Although some couples avoid issues by entering into matrimonial property agreements before getting married, this option only works in certain situations. You also have to supply creditors with a copy of your agreement in advance for it to have any impact.
Unfortunately, Wisconsin’s complex communal property laws catch many couples off guard. For instance, imagine that your spouse didn’t tell you that they took out a loan during your marriage. You might find yourself liable for a significant debt without even knowing it existed. These unpleasant surprises make it extremely difficult to get a fresh start.
Pursuing divorce debt consolidation through bankruptcy may be an option. Since the system doesn’t give people preferential treatment just because their spouses got them in over their heads, bankruptcy may be a viable backup plan. By halting collections and giving you time to figure things out, bankruptcy can help you take the unexpected consequences of getting divorced in stride.