09 Apr File Bankruptcy with Ex Spouse?
Bankruptcy and divorce go hand in hand. It may sound like a good way for divorced couples to end their joint bill problems. A prospective client recently posed the following question:
I was divorced within the past year. While I was married, my ex-husband and I incurred over $50,000 in credit card debt. Some of this debt is joint, some is in his name and a little in my name, although I am an authorized user on several of the cards. The divorce decree says that he is responsible for all of the debt in his name and the joint debt, and I am responsible for the credit cards in my name. He does not make enough money to pay this debt, especially with child support. We are on reasonably good terms and our daughter is 7, meaning that I will have to deal with him for a while. The other day he called me to say that he was going to have to file for bankruptcy and suggested that we file together to get rid of all the debt. We live in Georgia. Is this a good idea?
Divorced couples cannot file together. Only married couples can file jointly, so each of you would have to file an individual Chapter 7 or Chapter 13 case. I would strongly recommend that each of you hire your own lawyer. You may find a lawyer to accept both cases, but doing so is not a good idea for you or for a lawyer as there is far too much potential for a conflict of interest.
There may be good reasons for both former spouses to file for bankruptcy at the same time. The divorce order provision requiring a former spouse to pay joint debts will not change your contractual obligations to the credit card companies.
If you get sued by a credit card company if he does not pay or files bankruptcy on a joint debt, you will be responsible to the credit card lender and you will have to figure out how to collect from your ex-husband. In theory at least, if both of you file then you can both wipe out all of your credit card debt and eliminate a lingering problem that arose from the marriage. However, as you might expect, the answer to your dilemma is not quite so simple.
First, you need to look at the numbers. What is your potential liability if he files bankruptcy or if he does not pay and you get sued? Does he have any assets that you could seize in a contempt action? Are you willing to play hardball – i.e. pursue a contempt action in divorce court requesting that he be incarcerated for not honoring his obligations? Is his obligation to you non-dischargeable in bankruptcy (and are you willing to spend the money with a bankruptcy lawyer to confirm this)? If you are considering bankruptcy, are you looking at Chapter 7 or Chapter 13? Is he looking at Chapter 7 or Chapter 13?
As you can see, there are a lot of issues that you need to discuss with a lawyer who will concern himself with your interests only. You should also discuss your questions with your divorce lawyer as well, as Georgia law regarding contempt of court will come into play here.
You may conclude that, in fact, it does make sense for both of you to file an individual bankruptcy but you should approach the question by considering what makes the most sense for you and your daughter. My experience has been that the interests of divorced couples rarely align neatly and a coordinated filing will generate unintended consequences.
by Jonathan Ginsberg, Atlanta bankruptcy law
Jonathan Ginsberg, Esq.
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