Bankruptcy and divorce question

[BabyBre]

I know nothing of either.

 

What could be the possible financial benefit of filing for divorce and then each filing for bankruptcy as opposed to remaining married and filing for bankruptcy?

 

Would a couple need to divorce in order to file two seperate bankruptcy claims?

 

TIA

[Mom0012]

Well, I know someone who just went through this and she was advised to file bankruptcy before the divorce so that there would be no loose ends after the divorce was finalized. I can't remember the specifics, but she was definitely encouraged to do it before the divorce and told that she would be better protected if she did. She and her (soon to be ex) husband could have filed bankruptcy together, but he would not have cooperated, so she filed separately. It is my understanding that the only benefit of filing together was that it would have been more economical. It was something like $2000 for each person to file separately or $2,500 to file together. This was in Virginia.

 

Lisa

 

ETA: I went back and read your questions again and see that I totally missed the point. Sorry! From the experience of my friend, it doesn't seem that you would have to divorce to file separately since she did it before they were divorced. I wouldn't be surprised if this varied from state to state, though.

Edited August 23, 2009 by LisaTheresa

[IdahoHomeschooler]

If they are in one of the community property states, it may make more sense in that their assets are divided by divorce, and would give them each the exemptions allowed for bankruptcy. So if they jointly owned two vehicles, and the normal exemption allowed for one vehicle, by divorcing and each taking a vehicle, they each have a vehicle exemption. This is a very simplified explanation, of course, and in all likelihood these people have much larger assets to shelter by filing bankruptcy in this manner, such as owning two homes. In non-community property states, usually both spouses don't have to file, that is why I'm assuming it's a community property state.

 

Debra

[BabyBre]

If they are in one of the community property states, it may make more sense in that their assets are divided by divorce, and would give them each the exemptions allowed for bankruptcy. So if they jointly owned two vehicles, and the normal exemption allowed for one vehicle, by divorcing and each taking a vehicle, they each have a vehicle exemption. This is a very simplified explanation, of course, and in all likelihood these people have much larger assets to shelter by filing bankruptcy in this manner, such as owning two homes. In non-community property states, usually both spouses don't have to file, that is why I'm assuming it's a community property state.

 

Debra

 

 

We are a community property state, BTW. I know sheltering assets isn't their motivation. They've just seen their dd through cancer treatments after having been laid-off and losing insurance coverage. They've sold their cars for older ones and have their house on the market. I have no doubt they have significant debts, but the sudden filing for divorce is what's perplexing us (we're family). They then both filed for bankruptcy two weeks later.

 

Of course, it seems sudden to us on the outside. I know they've been through an incredibly stressful period, but their dd's healthy now and they're employed and insured again. I guess I'm just hoping there's a silver lining for their dd's sake. We're all just trying to make some sense of it without asking them to explain anything.

Edited August 23, 2009 by BabyBre

[Perry]

We are a community property state, BTW. I know sheltering assets isn't their motivation. They've just seen their dd through cancer treatments after having been laid-off and losing insurance coverage. They've sold their cars for older ones and have their house on the market. I have no doubt they have significant debts, but the sudden filing for divorce is what's perplexing us (we're family). They then both filed for bankruptcy two weeks later.

 

Of course, it seems sudden to us on the outside. I know they've been through an incredibly stressful period, but their dd's healthy now and they're employed and insured again. I guess I'm just hoping there's a silver lining for their dd's sake. We're all just trying to make some sense of it without asking them to explain anything.

I know a couple who got divorced because of major medical bills. The husband became quadriplegic after a bicycle wreck and needs extensive ongoing medical care. I think he filed for bankruptcy, and everything was put in her name. They continue to live together, but this is the only way they could remain in their house.

 

I've since heard that this is fairly common.

[Joanne]

Severe illness in a child and money issues are related to higher divorce rates.

 

I have through it all; chronic illness in a child, divorce and a bankruptcy following. Encourage yoy family members to build as much "people support" as they can during this awful time.

[Cera]

I know a couple who got divorced because of major medical bills. The husband became quadriplegic after a bicycle wreck and needs extensive ongoing medical care. I think he filed for bankruptcy, and everything was put in her name. They continue to live together, but this is the only way they could remain in their house.

 

I've since heard that this is fairly common.

 

It's also fairly common when children are ill. The parent with custody can apply for state medical coverage for the child to avoid preexisting condition issues with insurance and to avoid lifetime insurance caps.

[Mommyof4ks]

We are a community property state, BTW. I know sheltering assets isn't their motivation. They've just seen their dd through cancer treatments after having been laid-off and losing insurance coverage. They've sold their cars for older ones and have their house on the market. I have no doubt they have significant debts, but the sudden filing for divorce is what's perplexing us (we're family). They then both filed for bankruptcy two weeks later.

 

Of course, it seems sudden to us on the outside. I know they've been through an incredibly stressful period, but their dd's healthy now and they're employed and insured again. I guess I'm just hoping there's a silver lining for their dd's sake. We're all just trying to make some sense of it without asking them to explain anything.

 

I know nothing about either subject, but I do know that many parents are able to stay together during cancer treatment only to fall apart when things are better. My son has cancer, and many parents at our clinic have done just that. During treatment you just get through each day, but when it is over the pieces can be very hard to pick up and the pent up anger over the whole situation can be devastating to a marriage. Waiting for the other shoe drop so to speak knowing that relapse could happen at any time is hard to deal with also. Hopefully they can find peace and move on with their healthy dd whatever comes of the marriage and financial situation.

[IdahoHomeschooler]

We are a community property state, BTW. I know sheltering assets isn't their motivation. They've just seen their dd through cancer treatments after having been laid-off and losing insurance coverage. They've sold their cars for older ones and have their house on the market. I have no doubt they have significant debts, but the sudden filing for divorce is what's perplexing us (we're family). They then both filed for bankruptcy two weeks later.

 

Of course, it seems sudden to us on the outside. I know they've been through an incredibly stressful period, but their dd's healthy now and they're employed and insured again. I guess I'm just hoping there's a silver lining for their dd's sake. We're all just trying to make some sense of it without asking them to explain anything.

 

 

The thing I didn't mention in my first post is that maybe divorcing enables them to qualify for a chapter 7 bankruptcy instead of a chapter 13, by lowering their income to fit within the guidelines for a 7. I am, of course, not taking into account the numerous factors that may contribute to a couple seeking both a divorce and bankruptcy, just offering a few ideas about why it may make more sense to approach it that way from a financial standpoint. It would be very unfortunate if their marriage fell apart after everything they have been through. As a single parent to a child with chronic, potentially life-threatening, medical issues, I can certainly see how a marriage could be stretched beyond the breaking point.

 

Debra