Can Divorce-Related Debts Be Wiped Out in Pennsylvania Bankruptcy?

Divorce and bankruptcy can be unpleasant, but they may be necessary to help you get a fresh start. They also tend to take a large financial toll, and one may affect the other. Talk to your lawyer about how filing for bankruptcy could impact your assets in a divorce or vice versa.

While bankruptcy may help discharge certain debts, many debts related to divorce proceedings may not be discharged. For example, alimony and child support are almost never eligible for discharge through bankruptcy. Equitable distribution payments from dividing assets might be eligible for discharge, but only under certain bankruptcy chapters. Your attorney can help you decide which to file for first and how to protect your assets.

To get a free, confidential review of your case from our Pennsylvania bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519.

Can Divorce-Related Debts Be Discharged if I File for Bankruptcy?

Many debts may be discharged through bankruptcy, but debts related to divorce may be handled differently.

Debts That Can Be Discharged?

Our Allentown, PA bankruptcy lawyers may help you discharge various debts. Credit cards, unpaid medical bills, personal loans, and even old utility bills may be eligible for discharge. However, you must determine whether these debts are joint debts shared with your spouse. If they are, creditors may still come after your spouse for these debts if they do not also file for bankruptcy.

Debts Ineligible for Discharge?

Certain debts related to divorce proceedings might not be eligible for discharge, depending on how you file.

Debts that the court deems to be domestic support obligations, such as alimony or child support, are almost never eligible for discharge. Debts related to equitable distribution payments when assets are divided in a divorce may be discharged, but only under Chapter 13.

How Are Assets Divided in Divorce if Someone Files for Bankruptcy?

How assets are divided in a divorce proceeding may be heavily influenced by bankruptcy proceedings and vice versa.

Equitable Distribution Payments

Equitable distribution payments result from how assets are divided in a divorce. Many states, including Pennsylvania, emphasize dividing assets in the way most equitable for the case. As such, you may owe your spouse money or valuable assets in a divorce.

Your equitable distribution payments to your spouse may or may not be eligible for discharge. If you file for Chapter 7 bankruptcy, these debts are almost never eligible for discharge. However, they may be eligible under Chapter 13.

Joint Debts

If you are jointly liable for debts with your spouse, the debts may be discharged only for the spouse filing for bankruptcy. For example, if you and your spouse are jointly liable for credit card debt, the debt may be discharged for you but not for your spouse, unless they file for bankruptcy with you. In that case, creditors could come after your spouse for the debt, but not you.

Should I File for Bankruptcy Before or After Divorce in Pennsylvania?

Whether you should file for divorce or bankruptcy first is something you should discuss with your lawyer, as the answer depends on your assets and specific needs.

Bankruptcy Before Divorce

If assets are liquidated during bankruptcy, they obviously cannot be subject to equitable distribution during divorce. Similarly, bankruptcy proceedings may significantly alter your financial status.

Your finances are a key factor in how courts determine support obligations, like alimony. If you have much less financial resources, your support obligation might be reduced. Again, talk to your lawyer about this before making any important decisions.

Divorce Before Bankruptcy

If you file for divorce before filing for bankruptcy, you may be able to offload certain debts onto your spouse as part of the terms of a divorce settlement. Debts and assets may both be divided as equitably as possible. If debts are assigned to your spouse in the divorce, you may lighten your load when it comes to filing for bankruptcy. This may be a good idea if your spouse is responsible for most of your debt, although you should ask your lawyer first.

How Different Bankruptcy Chapters Affect Divorce-Related Debts

There is more than one way to file for bankruptcy, and each bankruptcy chapter may have a different impact on divorce-related debts.

Chapter 7

Chapter 7 bankruptcy focuses on liquidating assets to pay debts, and any debts left unpaid after everything is liquidated may be discharged if they are eligible. After a divorce, domestic support obligations like child support or alimony are almost never eligible for discharge under Chapter 7. It may also be difficult to liquidate assets you hold jointly with your former spouse. Similarly, equitable distribution payments may not be discharged.

Chapter 13

Chapter 13 requires bankruptcy petitioners to develop aggressive payment plans to repay debts over several years. Once the payment plan is complete, remaining debts may be discharged.

Like Chapter 7, you cannot discharge domestic support obligations under Chapter 13. However, unlike Chapter 7, debts related to equitable distribution payments may be discharged, depending on your circumstances.

FAQs About How Bankruptcy Affects Divorce-Related Debts in Pennsylvania

Can Alimony or Child Support Debts Be Discharged Through Bankruptcy?

No. Debts related to domestic support obligations, including alimony and child support, may not be discharged through bankruptcy. After your bankruptcy case is complete, your former spouse may still pursue payment for these debts.

What Happens to Joint Debts I Share with a Spouse After Bankruptcy?

Since spouses share joint debts, creditors may still go after one spouse for these debts even if they are discharged for the other spouse through bankruptcy. Both spouses would need to file for bankruptcy together to have these debts completely wiped out.

Does Bankruptcy Affect Equitable Distribution of Assets During Divorce?

Yes, but only if you file for Chapter 7 bankruptcy. Under Chapter 13, equitable distribution payments may be discharged. However, they may not be discharged through Chapter 7.

Should I File for Divorce or Bankruptcy First?

Your filing may vary based on your assets and your spouse’s cooperation. In some cases, it may be better to coordinate a divorce and divide assets before filing for bankruptcy. In others, someone might want to file for bankruptcy and wipe out certain debts before filing for divorce.

What Should I Do if I File for Bankruptcy and a Divorce?

Speak to your attorney about how to coordinate your finances so that you can afford both the divorce and bankruptcy proceedings. Bankruptcy may reduce your disposable income, making it much harder to afford certain divorce debts. A divorce court may be willing to alter the terms of your support obligations, considering your changed financial status.

Which Bankruptcy Chapter Should I File Under if I am Also Getting Divorced?

If you have divorce-related debts you want discharged, Chapter 13 could help you, depending on the nature of those debts. Under Chapter 7, most divorce-related debts are ineligible for discharge, although you should speak to your attorney about this first.

Contact Our Pennsylvania Bankruptcy Attorneys for Assistance Now

To get a free, confidential review of your case from our Berks County, PA bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519.