Bankruptcy & Your Divorce Or Separation
A divorce or separation can be difficult and stressful enough.
But what happens if you are dealing with a bankruptcy at the same time?
This can make things a lot more complicated and it’s worth noting that bankruptcy is quite common with a divorce.
One often causes the other because suddenly, you don’t have the same income.
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As well as this, your assets are halved and even paying for the services required through a divorce can be difficult.
At the same time, your expenses may remain the same, particularly if there are children involved.
So, what do you need to know about bankruptcy if you are proceeding through a divorce?
Certain Debts Won’t Be Discharged
Unfortunately, alimony payments are not going to be discharged during a divorce when you are filing for bankruptcy.
You will still be responsible for completing these payments.
You could already be behind and filing for bankruptcy won’t change this at all.
That said, the amount you pay is deducted before your surplus income is eventually calculated and the same is true for the payments you’ll need to complete through bankruptcy.
What About Joint Debts?
It’s always important to think about joint debts when you are proceeding through a divorce.
You will be liable for these debts, even if you weren’t the one who was using the credit card.
Both of you will be held responsible so you can’t just agree to split the debt.
This means that your spouse could be pursued for the entire debt.
If you do want to split your debts, then you will need to get the bank to agree.
Usually, this will be completed by creating two separate loans.
Be aware that banks are not required to agree or help with this process.
Have You Thought About Equalization Payments And Assets?
You will need to talk to your trustee about this because it can get quite complicated.
This means that you won’t have to pay back your spouse to keep particular assets.
However, the ownerships of assets are determined based on timing.
If the bankruptcy occurs before the divorce, then your assets are then part of the bankruptcy process.
They can no longer be distributed.
If however you get divorced first any assets that are transferred over to your spouse by the trustee will not be available through the bankruptcy process.
This will be the case as long as the transfer is not considered to be fraudulent.
In other words, you can’t transfer assets to your spouse to stop them from being sold.
Are you currently experiencing a divorce while filing for bankruptcy?
If so, we can help you understand this process and ensure that you do gain the debt relief that you need.
We have helped more than a hundred thousand Canadians with their debt and we’re confident we can support you too.
Contact us today and we can start this process immediately.
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