Filing for Bankruptcy Before or After a Divorce in North Carolina

Bankruptcy Lawyer Bryan W. Stone answers the question: “Does my spouse have to file bankruptcy if I do?”


A 2019 study found that divorce or separation is some of the most common reasons for filing for bankruptcy in the United States. Other reasons that drive hundreds of thousands of Americans into bankruptcy each year include unaffordable mortgages or foreclosures, spending beyond one’s means, providing financial help to friends or family members, and student loans.

finanical-documents-Charlotte-Monroe-Lake-Norman-Bankruptcy-Lawyer-300x185Why does divorce prompt many Americans to file for bankruptcy? Whether or not you will end up filing for bankruptcy after divorce depends on:

  • The distribution of marital assets;
  • Whether you can afford the debts;
  • Any other post-divorce financial stressors;
  • The amount of money you need to get yourself situated in your new life; and
  • The cost of your divorce process.


Types of Bankruptcy for North Carolina Debtors

Generally, debtors in North Carolina seek two types of bankruptcy before or after getting divorced.

  • Chapter 7 bankruptcy allows debtors to discharge all of their unsecured debts. Your non-exempt assets may be liquidated to pay creditors. After the proceeds from those assets are exhausted, the remaining debt is discharged.
  • Chapter 13 bankruptcy allows debtors to consolidate their debts, including secured ones, into a repayment plan. The plan is to make payments in installments over the next three to five years. Some of your debts, such as alimony, child support, and taxes, will be given the highest priority. The high-priority debts are followed by secured and then unsecured debts. Depending on your earnings and your ability to pay, a debtor may not be required to repay all unsecured debts.

Chapter 7 bankruptcy remains on your credit report for a decade. Within the next seven years, you will not be eligible to file another Chapter 7 bankruptcy. Chapter 13 bankruptcy will not disappear from your credit report for the next seven years.


Why File for Bankruptcy After Divorce?

Since the division of debt is often a reason why divorced people file for bankruptcy, you may be wondering what happens to your post-divorce debt after the filing. If you are facing lawsuits from debt collectors and creditors, filing for bankruptcy may be your most appropriate course of action in North Carolina.

If a creditor wins a judgment against you after your divorce, they can begin taking aggressive measures to collect the unpaid debt. These measures include placing a lien on your real estate, garnishing your wages, and levying your bank account, among other things.

When you work with a Charlotte Chapter 13 bankruptcy attorney to file for bankruptcy after divorce, the creditor must stop all attempts to recover the debt while your case is pending.


Why File for Bankruptcy Before Divorce?

Filing for bankruptcy before divorce allows you to file a “joint petition.” Many choose to file for bankruptcy before getting divorced because filing together is more efficient and cost-effective than filing separately.

Since the debts are likely to be shared and be considered “marital,” it makes sense to file for bankruptcy together to make it easier for the married couple to tackle the issue of debt and other financial issues related to their impending divorce. The bankruptcy can discharge all or some of the debts accrued during the marriage and prevent unnecessary arguments over who should owe what debt during the divorce proceedings.

Contact a Charlotte Chapter 13 bankruptcy attorney at Arnold & Smith, PLLC, to determine whether you should file for bankruptcy before or after divorce. Call at (704) 370-2828 to discuss your case.

Consult with our attorneys at Arnold & Smith, PLLC, to discuss your case. Call at 704-370-2828 right now to get your consultation scheduled or find additional resources here.





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