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Bankruptcy and Divorce

Bankruptcy Attorney Memphis

Many couples deal with financial issues and, unfortunately, those issues often lead to the breakup of many marriages. This can result in an almost domino-effect turn of legal events because it is also not uncommon for a person or couple to file for bankruptcy as a result of a divorce.

If you are struggling with financial issues and facing the breakup of your marriage, consider contacting a bankruptcy attorney Memphis relies on to find out what your legal options are. Bankruptcy attorneys can help their clients gain a fresh financial start and rebuild their credit.

Chapter 7

With a chapter 7 bankruptcy, the person filing really does have an opportunity for a financial fresh start. Some of the benefits to a chapter 7 filing include:

  • The client does not have a limit on the amount of debt they can include in their bankruptcy.
  • The client is not required to go through a repayment plan for any of the debt included in the bankruptcy.
  • Chapter 7 bankruptcy discharges more debt than other types of bankruptcy a client can file.

There are legal requirements to chapter 7 bankruptcy filings that your bankruptcy attorney can explain. For example, there are certain income limitations and there are limits on how often you are allowed to file for chapter 7, which is determined by the state you live in.

Filing for Joint Bankruptcy Prior to Divorce

Some couples choose to file for bankruptcy jointly as a couple before the commence divorce proceedings. There are several benefits to this, including:

  • You and your spouse do not exceed the income limitations set forth in the U.S. Bankruptcy Code.
  • Addressing marital debt prior to divorce will help ensure a fairer outcome instead of trying to negotiate the division of debts and property in a divorce settlement. This can actually make the divorce proceedings go quicker and smoother since bankruptcy will eliminate any disagreements of how property and debt should be split between the couple.

Filing for Individual Bankruptcy after Divorce

There are situations where a bankruptcy attorney may recommend waiting until after the divorce before filing for bankruptcy. Some of the more common reasons include:

  • If each spouse’s individual income qualifies them for chapter 7 but combined income exceeds makes them ineligible and they would be required to file chapter 13 if they filed as a couple.
  • If the client earns significantly less than their spouse, they may be able to file chapter 7 on their own instead of being forced to file for chapter 13 because their combined incomes make them ineligible for chapter 7.
  • Any property awarded in a divorce settlement becomes that spouse’s property, owned solely by them. This means that a creditor could not place a lien on the property because of debt the other spouse owed like they could if the property was still jointly owned. For example, let’s say a couple owns a house jointly. At some point during the marriage, the husband incurred a significant debt that is in his name only. As part of the divorce settlement, the wife was awarded the house and the husband’s name was removed off the deed. This means that the creditor the husband owes the debt to cannot place a lien on the house and the husband is now free to file for bankruptcy, where that debt will likely be discharged.


Thank you to our friends and contributors at Darrell Castle & Associates, PLLC for their insight into bankruptcy after a divorce.

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