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Helton Law Firm, PLLC

How marital assets are affected by divorce and bankruptcy

Tennessee couples who are thinking about ending their marriage often overlook how finances will be affected by the decision. Property obtained during the marriage can end up in dispute. Assets, valuation and property division will all come to the forefront. Often, there are financial issues that make bankruptcy a possibility.

With the financial problems that make options such as bankruptcy come under consideration, other factors have to be taken into account. The couple must examine the incomes of each spouse. One might have a large debt load while the other has a high income. If this is the case, filing for a joint Chapter 7 might be a complicated endeavor since the total income of the household is taken into account for purposes of the means test. A way around this is to file for divorce before filing for bankruptcy.

Another issue is that both spouses will need to agree on the decision to file for bankruptcy. A joint bankruptcy cannot be done unless both have consented. It might be preferable for an individual spouse to file, but that will not discharge the other party's debts. Filing before the divorce could be a wiser option. Examining the distribution of the debts will provide a window into whether or not an individual bankruptcy is better. One spouse with separate assets could prevent the bankruptcy discharge.

During a divorce, the property of the estate must be addressed. When there is a bankruptcy filing, the property of the debtor will become part of the bankruptcy estate. It cannot be divided in the divorce unless the bankruptcy judge allows it or the bankruptcy is concluded. This can cause a delay to the divorce. With all of these concerns, a person who is getting a divorce and considering bankruptcy may want to speak to an attorney about the best way to approach the issue of the division of marital property.

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