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How Will Your Divorce (and Your Ex’s Debt) Affect Your Future?

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.

Call the Burr Law Office at (262) 827-0375 to find out how to unshackle yourself from the burden of debt due to a divorce.

How to Cope with Bankruptcy and Divorce

When it comes to legal processes, bankruptcy and divorce are among the most stressful. The same goes for life in general. Unfortunately, the level of stress involved in filing bankruptcy can sometimes result in filing for divorce, or the other way around. What does this mean for you? It means it’s incredibly important to keep things organized so nothing falls through the cracks.

Which one first?

If you’re in a situation where bankruptcy and divorce are both on the table, saving money will likely be ideal. For this reason, you’d be smart to file a joint bankruptcy before getting divorced. Not only will this save you on court fees, you’ll also save on attorney fees. Something to note, however, is that it’s crucial that you divulge all information to the attorney you’re hiring, just as in any bankruptcy. In addition to cost savings, filing for bankruptcy before divorce will help to simplify any issues surrounding property division and debt, leading to lower costs during your divorce proceedings.

What type?

Not sure which type of bankruptcy is best for you? It depends on your financial situation and a number of other factors. A Chapter 7 will get rid of unsecured debts and can be completed in just a few months or so. A Chapter 13, on the other hand, lasts 3-5 years because it involves paying back your debt through a repayment plan.

If you’ve found yourself in a situation involving bankruptcy and divorce, a good idea is to contact an experienced bankruptcy attorney like Michael Burr to guide you through the process. Contact us to set up a free consultation today.

How to Continue With a Bankruptcy Petition During Divorce

Financial difficulties can put strain on a marriage and contribute to the decision to file for divorce. Couples who decide to file for divorce in the midst of filing for bankruptcy may face complications in terms of discharging their debts and reporting their assets. For this reason, couples filing for both at the same time need to take additional steps to ensure that this process goes smoothly.

Consult with an Attorney

Filing for divorce may affect your bankruptcy filing status and your ability to meet the obligations in a Milwaukee Chapter 13 repayment plan. That’s why it’s best to seek the help of an attorney who has significant experience with bankruptcy law. You may need to consult with both a divorce attorney and a bankruptcy attorney throughout the course of your case. Your attorneys can help each other determine whether or not it’s in your best interest to proceed with divorce before your Chapter 13 petition is resolved.

Establish Divorce Settlement

You should try to create a divorce settlement agreement with your spouse that determines how the monthly payment plan of a Chapter 13 petition will be divided between you. Failing to reach an agreement means that you may have to handle the matter in court, which may reject the notion of designating one spouse as solely responsible for the debt.

Talk to Your Trustee

You need to talk to the trustee assigned to your case about your plans to file for divorce. Your trustee receives monthly payments and allocates them to your creditors according to your payment plan, so he or she will need to review your proposed divorce settlement and individual spousal incomes.

Call (877) 891-1638 to discuss your filing options with Milwaukee bankruptcy attorney Michael Burr. We provide affordable services to help eliminate or consolidate your debts. Our goal is to help you find permanent relief from your financial hardship and secure a positive financial future.