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People often file for bankruptcy after a divorce because the financial impact of ending a marriage can be severe. Divorce frequently brings a combination of reduced income, increased expenses, and the division of assets, which can leave one or both spouses struggling to meet financial obligations. Here’s a detailed breakdown:
1. Division of Debts and Assets
During a divorce, couples must divide both assets and debts. In some cases, one spouse may be responsible for debts they did not incur, such as joint credit cards, mortgages, or loans. Managing these debts alone can become overwhelming, prompting some to consider bankruptcy as a way to relieve that burden.
2. Reduced Income
Divorce often reduces household income, as one spouse may lose a second income source or have to pay alimony or child support. With less money coming in, it may be difficult to cover living expenses and outstanding debts simultaneously. Bankruptcy can provide relief by eliminating or restructuring these obligations.
3. Legal and Medical Expenses
Divorce proceedings themselves can be costly, including attorney fees, court costs, and sometimes medical or therapy expenses. When combined with existing debt, these costs may push someone into financial distress, making bankruptcy a practical solution.
4. Protecting Financial Stability
Bankruptcy after divorce can help individuals reset financially. Chapter 7 bankruptcy can discharge many unsecured debts, while Chapter 13 allows for a structured repayment plan, providing breathing room to rebuild credit and regain stability after the emotional and financial stress of divorce.
5. Avoiding Default and Foreclosure
If a divorce leaves one spouse solely responsible for a mortgage or other secured debts, missing payments could result in foreclosure or repossession. Filing for bankruptcy can temporarily halt these actions, giving the individual time to reorganize their finances.
In short, bankruptcy is often a tool to regain control after divorce, providing relief from overwhelming debt and a fresh financial start. It’s a common step for those facing the combined pressures of reduced income, ongoing expenses, and divided financial responsibilities.
This article was written by Alla Tenina. Alla is a top San Fernando Valley bankruptcy lawyer, and the founder of Tenina Law. She has experience in bankruptcies, real estate planning, and complex tax matters. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; the ABA and its members do not recommend or endorse the contents of the third-party sites.
