One of the most heatedly disputed issues in a divorce is the division of property. However, in the midst of trying to decide who gets what, many couples fail to consider what will happen to their debt once they’ve split. It’s just as important to figure this out since people commonly face financial hardship after their marriage ends. In many cases, spouses find it beneficial to meet with a bankruptcy attorney to explore all their options before moving forward with divorce proceedings. Here are a few questions that are frequently asked during a consultation. 

Bankruptcy & Divorce FAQ 

How Is Debt Shared in a Divorce?

Iowa is a common law state, which means debts in the name of one spouse will generally remain the sole responsibility of that spouse once the divorce is finalized. However, there are usually exceptions to this if the debt was incurred to provide household necessities or living expenses. The judge deciding how marital debts should be divided will also consider the length of the marriage, the financial situations of both parties before and during the marriage, who benefited more from the debt, and whether one spouse ran up credit card debt without the other’s knowledge. 

Should Bankruptcy or Divorce Be Filed First?

It’s generally not recommended that couples file for bankruptcy and divorce at the same time, as this will complicate matters further and end up delaying the divorce process. Filing a joint bankruptcy before divorcing will allow spouses to double their exemptions and protect more assets. It will also help reduce bankruptcy attorney and filing fees, as well as get rid of joint debts. Although, filing for divorce first may be necessary if a couple earns too much to qualify for a Chapter 7 bankruptcy. 

Can All Debts Be Discharged in a Bankruptcy? 

It is not possible to discharge debts related to child support, alimony, student loans, some taxes, court-ordered fines or penalties, or attorney fees owed in child custody or support cases. If a couple owes any of these types of debts, they will still be obligated to pay them back after their bankruptcy case has been resolved. Inaccurately disclosing all your marital debts can also prevent certain ones from being discharged.

Is It Better to File a Chapter 7 or Chapter 13 Bankruptcy? 

Chapter 7 is typically faster to complete and eliminates many unsecured debts. However, some property may have to be relinquished to pay back creditors. A Chapter 13 requires debt to be paid back according to a repayment plan that lasts three to five years. This may be too long for couples to wait before getting divorced.

Divorce and bankruptcy often go hand-in-hand. If you’re struggling with debt problems, it’s essential to gain clarity on the most effective way to handle your specific situation. A bankruptcy attorney from Cronin Skilton & Skilton, P.L.L.C can help assess your finances to determine if filing is the best solution for you. For more than 80 years, the law firm has been entrusted to guide the residents of Nashua and Charles City, IA, through complex divorce and bankruptcy proceedings. Call (641) 435-2462 to speak with an experienced bankruptcy attorney in the Nashua office or (641) 228-3318 to consult the legal team in Charles City. You can also visit their website for more information on the services they offer.