Bankruptcy and Divorce: How These Two Processes Interact

Divorce and financial trouble often go hand in hand. Sometimes the money problems contribute to the divorce. Sometimes the divorce itself creates new financial strain by splitting one household into two. Either way, a lot of people find themselves dealing with both situations at the same time and wondering how the two processes affect each other.

The interaction between bankruptcy and divorce is one of the more complicated areas of law that we handle at our Pittsburgh office. Here is what you should understand about how these two processes work together and how timing can make a significant difference.

Should You File Bankruptcy Before or After Divorce?

This is usually the first question people ask, and the answer depends on your circumstances. There are real advantages to both approaches.

Filing bankruptcy before the divorce can simplify the divorce process significantly. If you and your spouse file a joint Chapter 7 bankruptcy before the divorce, you can eliminate most of your joint debts. When it comes time to divide property and debts in the divorce, there is simply less to argue about. The credit card balances, medical bills, and personal loans that would otherwise need to be assigned to one spouse or the other are gone.

A joint bankruptcy filing also costs less than two separate filings. You pay one filing fee and, in most cases, one attorney fee. If both spouses need debt relief, doing it together before the divorce is often the most cost-effective approach.

Filing bankruptcy after the divorce makes more sense when you and your spouse cannot cooperate enough to file together, when only one of you needs bankruptcy relief, or when the divorce needs to happen first for safety or personal reasons. After the divorce, your income is evaluated individually, which can make it easier to qualify for Chapter 7 if your former spouse was a higher earner.

Joint Debts Do Not Disappear in Divorce

This is one of the most misunderstood aspects of divorce and debt. When a divorce decree says that your ex-spouse is responsible for paying a particular credit card or loan, that only applies between the two of you. It does not change your agreement with the creditor.

If both your names are on a credit card and the divorce decree assigns that debt to your ex, the credit card company can still come after you for the full balance if your ex does not pay. The divorce decree is not a contract between you and the creditor. It is a court order between you and your ex-spouse. Your ex might be in contempt of court for not paying, but the creditor does not care about that. They want their money, and they have a legal right to collect from either account holder.

This is why filing bankruptcy can be so valuable in the divorce context. A Chapter 7 discharge eliminates your personal liability to the creditor. Even if your ex defaults on a debt that was assigned to them, the creditor cannot pursue you for it after your discharge.

Child Support and Alimony Cannot Be Discharged

Bankruptcy does not eliminate domestic support obligations. Child support, alimony, and maintenance payments are not dischargeable in any chapter of bankruptcy. If you owe back child support or alimony, you will still owe it after your bankruptcy case is over.

In Chapter 13 bankruptcy, you can include past-due support payments in your repayment plan and pay them off over the plan period. But the obligation itself does not go away. Current support payments must be kept up to date throughout the plan, and failure to stay current on domestic support is grounds for dismissal of the bankruptcy case.

Property settlement obligations from the divorce, which are separate from support, receive different treatment depending on which chapter you file. In Chapter 7, property division debts are generally not dischargeable. In Chapter 13, they may be treated differently depending on the specific terms of the settlement. This distinction can affect which chapter makes more sense for your situation.

The Automatic Stay and Divorce Proceedings

When you file bankruptcy, the automatic stay stops most collection actions and legal proceedings against you. However, the stay has limited effect on divorce proceedings. A family court can continue to handle custody, visitation, support, and domestic violence matters even while a bankruptcy case is active.

What the automatic stay does affect is the division of property. If the divorce court is about to distribute assets and one spouse files bankruptcy, the property division aspect of the divorce may be paused until the bankruptcy case is resolved. This can complicate both cases and is one reason why coordinating the timing of both filings matters.

Practical Considerations for Pittsburgh-Area Residents

Allegheny County and the surrounding counties each have their own pace when it comes to divorce proceedings. A no-fault divorce in Pennsylvania requires a 90-day waiting period if both parties consent, or a one-year separation period if one party does not. Factoring bankruptcy into that timeline requires planning.

If you are currently going through a divorce or anticipating one, and you are also struggling with debt, the single most valuable thing you can do is talk to a bankruptcy attorney before making major decisions. The order in which things happen matters. Whether you file jointly or individually matters. What debts you agree to take on in the divorce settlement matters.

At Bryan P. Keenan & Associates, we work with people navigating both processes regularly. We can coordinate with your divorce attorney if you have one, or we can help you think through the timing and strategy on the bankruptcy side so that you are positioned as well as possible regardless of what happens in the divorce.

No one plans for their marriage and their finances to fall apart at the same time. But when it happens, there are tools available to help you get through it and come out the other side in a better place. Understanding how bankruptcy and divorce interact is the first step toward making smart decisions during a difficult time.