Minnesota Divorce and Bankruptcy: An Introduction

Mar 8, 2010

Today’s post is a guest post by Elizabeth Rosar Chermack. Liz is a Minnesota bankruptcy attorney providing compassionate and practical advice to her clients. Liz is the author of the Minnesota Bankruptcy and Housing Blog.

Bankruptcy and divorce often go hand-in-hand. Sometimes financial problems lead to the breakdown of a marriage. Other times the breakdown of the marriage causes the couple to have to file for bankruptcy. When a couple goes from running one household together to living separately, their expenses increase. Now there are two rent payments, two sets of utilities, two kitchens to keep stocked. The process of divorcing can also lead to increased expenses.

Sometimes one spouse may not have been forthcoming about the debt that was incurred during the marriage. The other spouse may feel betrayed when they realize that their spouse hid massive amounts of credit card debt from them. This debt could be in one spouse’s name, or it could be a joint debt. The process of identifying and separating this debt can be a burden.

The current housing crisis has resulted in some divorcing couples choosing to file for bankruptcy. The couple’s house may be “upside down” or “underwater.” If neither party is able to afford the house on their own, a foreclosure or short sale may be imminent. A foreclosure on the first mortgage or a short sale could leave a personal liability for a second mortgage. The combination of the couple’s other debts (credit cards, medical bills, etc.) and the negative equity or remaining liability could be enough to cause the couple to file for bankruptcy.

If a divorcing couple has a high debt load, it is important to learn about bankruptcy. Both a bankruptcy attorney and a divorce attorney should be consulted in order to fully understand the available options. There are important things to consider when deciding whether or not to file bankruptcy, and if so whether to file jointly before the divorce or individually after the divorce. These considerations will be discussed in upcoming posts on the Minnesota Bankruptcy and Housing Blog.

This is the first post in a series about Minnesota Divorce and Bankruptcy. To learn more about the interaction between bankruptcy and divorce and how bankruptcy can affect child support and spousal maintenance obligations, check out http://blog.chermacklaw.com throughout the next week.