When financial strain pushes a marriage to its breaking point, many individuals find themselves contemplating both bankruptcy and divorce. While daunting, these legal processes can offer a path to a fresh start. If you find yourself at this point, you are courageously taking a step toward regaining control of your life.
Dividing debts between spouses in divorce
Maryland is a “marital property” state. This means that courts divide property acquired during the marriage fairly between spouses in a divorce, including debts.
Courts determine responsibility for debts by classifying them as either marital or separate. Debts acquired during the marriage are marital, regardless of which spouse’s name is on the account. This includes credit card debt, mortgages and loans.
Debts incurred before the marriage or after a legal separation are separate debts. The spouse who incurred a separate debt retains responsibility for it.
However, courts also examine who benefited from the debt and each spouse’s financial situation. Even if a debt is technically “marital,” the court may order one spouse to bear a larger portion based on these factors.
Getting a fresh financial start through bankruptcy
Bankruptcy offers a legal process to eliminate or restructure debts when you can no longer meet your financial obligations. For individuals, the two most frequently used types of bankruptcy are:
- Chapter 7 bankruptcy: This option allows the liquidation of non-exempt assets to pay off creditors. You receive a discharge, freeing you from most debts.
- Chapter 13 bankruptcy: This option lets you create a repayment plan for 3-5 years to catch up on missed payments or debts like mortgages and car loans, potentially saving your assets.
When filing for bankruptcy, you must disclose all debts, including those incurred during the marriage. A bankruptcy trustee develops a plan to resolve your debts based on an assessment of your financial standing.
Filing for bankruptcy affects your credit score but can also stop creditor harassment and wage garnishments. This can be crucial when confronting another situation as challenging as divorce.
Securing a more stable future
Remember that experienced guidance can make a significant difference when considering divorce and bankruptcy. A Maryland attorney specializing in family law and bankruptcy can help you explore the most effective way forward for your unique circumstances.