Debtors’ nightmare: divorce and bankruptcy

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Dear Bankruptcy Adviser,
My husband and I filed for divorce and have reached an agreement. However, since the agreement, my husband has been ill for some time and has high medical bills and credit card debt and has now lost his job. With these bills, he has stated that he is filing for bankruptcy. What I want to know is, if he files for bankruptcy and the bills that are included were incurred prior to the divorce, can they come back and make me pay since he is filing for Chapter 7?  Our divorce is recent and has not been but over three months since filing for divorce.
— Jamie

Dear Jamie,
Unfortunately, this question about divorce and bankruptcy cannot be answered without much more information. I will try to give you a general idea as to your potential liability, but I need to explain a few family-law terms.

The divorce decree or separation agreement is executed through the family law court. The divorce decree is a court’s formal order, granting a termination of marriage. In general, the judge in a divorce issues a judgment for the dissolution of marriage, and the judgment is confirmed when the decree is signed and dated by the judge and court clerk. Each state may have different names for this type of divorce decree.

By contrast, the separation agreement is setting out the terms of the separation of a married couple. The agreement may contain all the same aspects of a divorce judgment, but the marriage is not terminated.

You need to understand one harsh truth. Your creditors are not part of your decision to get divorced, even though debt might be one of the reasons for your divorce. Through your divorce decree or separation agreement, the debt is divided between you and your husband, but that does not mean your liability for any portion of the debt is magically lifted. It only means that one spouse has agreed to make payments on his or her part of the debt.

The creditors do not care how the bills are paid, only that either you or your husband pays them. You can divide up the creditors as much as you want, but both of you signed onto those credit cards.

Now, there is a pending divorce and bankruptcy. This creates additional issues to address. Your husband may have learned that once the divorce judgment becomes final and the responsibility to pay on the debt is established, the terms of that judgment cannot be eliminated in a subsequent bankruptcy filing. That means your husband could agree to pay all the medical debt and then file bankruptcy. The creditors may still come after you, but because of the divorce judgment, you would be able to make him pay for his agreed-upon portion of the debt.

Most of the time, one party agrees to pay for the marital debts. Since the agreement acts as a judgment, that debt cannot be eliminated in bankruptcy. So had your husband agreed to pay these bills then subsequently filed for bankruptcy, he would not be able to eliminate that debt in his bankruptcy. However, by filing prior to a divorce, he might be able to eliminate his obligation to pay. He then must address this issue during the divorce and determine whether he will accept liability on debt that he likely will eliminate in bankruptcy.

Thus, you could be stuck paying those bills or forced into bankruptcy. Either way, you could be facing big challenges soon. I hope that your divorce is not compounded by this problem, but that might be the unfortunate result. Unfortunately, while I know money might be tight, you may need a lawyer’s advice.

Ask the adviser

To ask a question of the Bankruptcy Adviser go to the “Ask the Experts” page, and select “Bankruptcy” as the topic. Read more Bankruptcy Adviser columns and more stories about debt management.

Bankrate’s content, including the guidance of its advice-and-expert columns and this Web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this Web site is governed by Bankrate’s Terms of Use.