Can Bankruptcy Escape Debt From a Divorce Settlement?

Divorce and bankruptcy often intersect in complicated ways. If you are going through a divorce and struggling with debt, or if you have already divorced and are now facing financial hardship, you may be wondering whether bankruptcy can help you escape debts that were assigned to you in a divorce settlement.

Divorce Debt and Bankruptcy: The Basics

When a couple divorces, the court divides marital debts between the spouses. These debts may include joint credit cards, mortgages, car loans, and other obligations. The divorce decree assigns responsibility for each debt to one spouse, but it does not change the original contract with the creditor. If your ex-spouse fails to pay a joint debt assigned to them, the creditor can still come after you.

What Debts Can Be Discharged in Bankruptcy After Divorce?

The answer depends on the type of debt and the type of bankruptcy you file. In general, debts that are classified as 'property settlement' obligations — such as a requirement to pay off a joint credit card or assume a car loan — may be dischargeable in Chapter 7 bankruptcy. However, debts classified as 'domestic support obligations' — including alimony and child support — are never dischargeable in bankruptcy.

Chapter 7 vs. Chapter 13 for Divorce Debt

Chapter 7 bankruptcy can discharge property settlement debts, but it cannot discharge domestic support obligations. Chapter 13 bankruptcy offers more flexibility — it can discharge certain property settlement debts that Chapter 7 cannot, as long as the debtor completes the repayment plan. However, domestic support obligations remain non-dischargeable under both chapters.

Timing Matters: Filing Before or After Divorce

The timing of your bankruptcy filing relative to your divorce can significantly affect the outcome. Filing jointly before divorce can be more efficient and cost-effective, but it requires cooperation between spouses. Filing individually after divorce allows each spouse to address their own debts independently. An attorney can help you evaluate the best timing strategy for your specific situation.