What if My Spouse Files for Bankruptcy During Divorce?

You may be embarrassed to admit that you stayed in the dark, so to speak, about how your finances were handled during your marriage. However, it is arguably natural for this dynamic to play out in a marriage; our firm has definitely seen this plenty of times. Unfortunately, though, this may work to your disfavor if your spouse petitions for a divorce. What’s worse, you may be completely blindsided by your spouse’s bankruptcy declaration soon after. If you find yourself in this predicament, please continue reading to learn what happens if your spouse files a bankruptcy petition simultaneously with your divorce petition and how one of the experienced Clarksville divorce lawyers at Fendley and Birch can help protect your personal finances during this delicate time.

What happens if my spouse files for bankruptcy during our divorce proceedings?

It may not be good news if your spouse files for Chapter 7 bankruptcy before your divorce case is finalized. This is because, at this time, their appointed bankruptcy trustee may be ordered to take control of their assets, assess which ones to liquidate, and use these funds to pay off their outstanding creditors. Some or most of your marital assets may be a part of this sale. This means these marital assets will no longer be available for equitable distribution in your divorce proceedings. In other words, you may walk away from your divorce with less than you initially anticipated.

This is not to mention that your spouse’s bankruptcy proceedings may put an indefinite halt on your divorce proceedings. Primarily, this is because an automatic stay temporarily stops most legal actions against your spouse, including a divorce action. Further, the Tennessee bankruptcy court has the right to establish which assets belong to the bankruptcy estate before they can be distributed in a divorce settlement.

What can I do to protect myself during my spouse’s bankruptcy proceedings?

You may feel completely helpless once your spouse declares bankruptcy, subsequently pausing your divorce case all while the marital assets you once enjoyed are being taken away. However, during this dead period, there are measures you can take to protect yourself financially from your spouse’s mistakes. They read as follows:

• You may open up an individual bank account under your name and start to deposit your earned income here.
• You may apply for credit cards under your name and begin to build your credit history and a positive credit score.
• You may keep an inventory of the separate assets you earned outside of your marriage so your spouse’s bankruptcy trustee cannot claim them.
• You may attempt to negotiate to have your spouse remove your name from joint accounts and debts so you will not be legally obligated to pay them.
• You may keep a watchful eye on your credit reports to address inaccuracies or new debts mistakenly added due to your spouse’s individual bankruptcy.

Before you take any further initiative with your divorce, we urge you to consult one of the skilled Clarksville family lawyers. Most definitely, the team at Fendley and Birch is eager to work with you.