We are getting divorced and we need to file for bankruptcy relief, help!

Filing bankruptcy in the middle of a contested divorce is usually not a good idea. Debt awarded in a divorce decree is not dischargeable in a Chapter 7. It all comes down to whether the debt is defined as support. As long as the debt is NOT defined as support, it can be defined as dischargeable debt in bankruptcy. Thus, make sure the debts are not included in the final decree, that way, either party may file for bankruptcy if necessary.

Another strategy is to file for joint bankruptcy before the divorce, especially for couples with a significant marital debt. That way, the couple can discharge the martial debt and prevent fighting the other’s effort to discharge martial debt after the divorce.

Divorce can also help in eligibility for a Chapter 7 bankruptcy.  Income may shift after a divorce due to child support or alimony payments, thus making it easier to qualify for a Chapter 7 bankruptcy. The Trustee will usually ask for recent divorce decree and will question a divorce that seems to be sham. If the Trustee sees the division of property in a divorce to be too neat, such as one spouse waiving all alimony and receiving all property, then the Trustee will challenge the divorce as a sham.