Chapter 13, Bankruptcy, Divorce, and Foreclosure

A Ch 13 bankruptcy contrasts a chapter 7 bankruptcy in that it endures for a period of three to 5 yrs (36 to 60 months) as a result of a bankruptcy repayment plan that is set by you and your attorney and then confirmed by the trustee’s office. In this situation, payback of some portion or in some cases all debts (considered a 100% plan bankruptcy).  When filing in the 13 portion of the bankruptcy, it could prove better to file on an individual basis when considering a divorce because this would essentially tie you to your spouse/ex-spouse for a long period of time until completion.

Property Division in Bankruptcy & Divorce

Wiping debts individually or jointly in a bankruptcy filing can greatly simplify division of property during a divorce action. Yet before a person chooses to file a bankruptcy jointly with a spouse while still married, you need to be sure that your Texas state exemptions allow enough property to keep for you and for your ex-spouse after the bankruptcy. In Texas and many other states, a couple is allowed to double amounts on exemptions. For those married couples who own a fair amount of land or property, filing jointly can be an important consideration to double exemptions. Additionally, if one of the ex-spouses keeps the house, but the house was in some sort of late status, such as in default, in foreclosure, or simply late by a 2-12 weeks, filing bankruptcy with a foreclosure defense lawyer can be an excellent option that works to the advantage of the spouse who gets the house.

If your situation is such that you have a larger amount of property or land than can be exempted through filing a bankruptcy jointly, it could end up being to your advantage to file a bankruptcy individually rather than jointly–and this can be done either before or following the division of property from the divorce.

Allocation of Marital Debts

Litigating between spouses in a divorce situation regarding the marital debts can be tricky. Determining which assets are to be assigned during divorce to each spouse, it can end up feeling like a costly process.  Additionally, a divorce decree can order a spouse to cover certain financial debts which have been incurred in the marriage.