Wednesday, April 3, 2013

Financial Issues and Bankruptcy in Divorce Cases

By Harry J. Lenaburg, Esq

In many Family Law cases a primary reason for the breakdown of the marriage is financial problems.  It appears to be human nature, or at least an often occurring phenomenon, that individuals and couples tend to live a life style that consumes virtually all of their available income.  Thus when the unexpected happens, for example, a cut back in hours at work, a layoff, an increase in the monthly health insurance premium through your employer or uncovered medical bills due to an illness or accidental injury, there is no cushion to fall back on.  These and similar financial pressures result in conflicts between spouses, and may ultimately lead them to the filing of a Petition for Dissolution.
Often either or both of the spouses will decide that it is in their best interest to file a Bankruptcy to eliminate the debt.  Our office does not represent Debtors in Bankruptcy matters, however, in a circumstance where a Bankruptcy may be appropriate, we always refer the client to an experienced Bankruptcy practitioner, to insure that the client is properly advised and represented in the Bankruptcy matter.
Once a Decree of Dissolution is entered by the court, the parties must file separate Bankruptcy petitions.  This results in both of the now ex-spouses incurring an attorney fee and a filing fee for their separate bankruptcy matters.  In our practice we encourage the spouses, assuming they will both wind up filing for Bankruptcy protection, to file a joint Bankruptcy petition before the dissolution is finalized by decree.  That way the cost of the Bankruptcy is around one half of what it would be if they filed separately, and it also takes the issue of debt out of the negotiations or litigation to resolve the dissolution.
Of course the better policy regarding finances would be if we would all be better stewards of our money, being prepared for those unexpected financial contingencies, but faced with the reality on the ground in many Family law cases I am confident that this advice to clients to file the bankruptcy jointly before finalizing the dissolution, will provide both parties with a more satisfactory result, at least as far as debt is concerned.

The Law Firm of Jessica M. Cotter, Esq. 
18301 North 79th ave
Suite F-186
Glendale, AZ 85308

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