Credit: When Your Ex Files for Bankruptcy

By Francine L. Huff
Mortgage Credit Problems Columnist

Going through a divorce is stressful enough without having to worry about your ex-spouse filing for bankruptcy, too. A bankruptcy filing by an ex can lead to you having damaged credit and being denied approval for loans. Here's what you need to know about how your ex-spouse's bankruptcy filing could impact your finances.

    

Collecting Debts

Once your ex-spouse has filed for bankruptcy, an automatic stay will be granted that blocks creditors from collecting on debts such as foreclosures, garnishments, credit cards or consolidation loans. If you are listed as a co-signor on any of your ex's debts, you may be required to pay back that money even if your ex-spouse was assigned responsibility for it through the divorce decree. Some divorce decrees address the issue of what happens if an ex-spouse defaults on loans.

Child Support

However, under the U.S. bankruptcy code, your spouse will still be responsible for paying taxes, child support, and alimony. If you've already filed a motion to increase child support from your ex, the bankruptcy judge may wait to hear the support motion after the bankruptcy case is finished. Some judges may allow you to continue with your motion to receive support. To protect yourself, you may need to file an adversary complaint make sure your spouse doesn't get out of paying any marital debts that are listed in a property settlement.

Pay Off as Much Debt as Possible

If you're in the middle of divorce proceedings it makes sense to pay off as much debt as possible. Close joint accounts and review your credit report to see exactly what debts you owe. Try to get a copy of your ex's credit report, too. If you make money from selling a home you can use some of it to pay off credit cards, debt consolidation loans, and other bills. Your attorney may be able to negotiate a settlement with your credit card company if you pay off the debt in a lump sum.

You may be liable for paying off joint credit card accounts, even if your ex was the one who ran up the debt.  If you are unable to make the payments, it could result in you having damaged credit and being turned down for a mortgage or auto loan.

Choose a knowledgeable attorney who can help you deal with the fallout of your ex's bankruptcy filing. Even if your ex-spouse hasn't filed for bankruptcy and you're still in the middle of divorce proceedings, make sure the divorce decree addresses what will happen in the event of a bankruptcy.

Sources

• DivorceNet
• "Family Law and Bankruptcy," by Theodore Sliwinsi, www.divorcenet.com.

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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