In “Debt and Divorce, Part I”we explained that while you can divorce your spouse, you can’t divorce your debts.  Divorce decrees only affect the debt between the parties to the divorce case, not creditors.  So if you owe MasterCard prior to your divorce, you’ll owe MasterCard after your divorce.  This is why we suggested that a divorcing couple explore a joint bankruptcy filing to eliminate debt and, consequently, the need to fight over which spouse must pay which debts.   

In this article we’ll address what happens if the divorcing couple does not file a joint bankruptcy prior to the entry of the divorce decree.  

The divorce decree and property settlement agreement will address the rights and duties of the parties regarding property, debts, alimony, and child support.  For debts, the decree will order one party or the other—or sometimes both—to pay various debts.  

For example, let’s say the couple has a MasterCard with an outstanding balance of $20,000 and that both are jointly liable for the debt.  The decree might contain a provision stating, “Husband shall pay the parties’ Bank of America MasterCard debt and hold Wife harmless from any liability thereon.”  This means the family court has ordered the husband to pay the credit card and makes him liable to the wife for doing so.  Prior to divorce, therefore, the husband had one creditor associated with this debt: Bank of America.  After the divorce, the husband has two creditors: Bank of America and his former wife.  

What happens if the husband files bankruptcy?  The answer is—as with most bankruptcy questions—“it depends.”  In this case it depends on whether the husband files a Chapter 7 bankruptcy (often called a “liquidation bankruptcy” or “straight bankruptcy) or a Chapter 13 bankruptcy (often called “reorganization bankruptcy” or “payment plan bankruptcy”).  

In Chapter 7 these types of “hold harmless” debts can’t be discharged.  However, in Chapter 13 hold harmless debts are dischargeable.  This means that as long as the husband makes the required Chapter 13 plan payments, any obligation he may have to both Bank of America and his former wife would be discharged.  But with Chapter 7 only the husband’s obligation to Bank of America would be discharged; his obligation to his former wife would remain.  

Finally, we’d like to make two other important points.  First, child support and alimony—debts “in the nature alimony, maintenance or support”—can’t be discharged in bankruptcy, regardless of which chapter the debtor files.  Second, if you file bankruptcy after your divorce, make certain that your bankruptcy filing is accurate. While all debtors should strive for accuracy in the information they provide to the court, it’s even more important for those who are divorced.  They should assume their former spouse will review the bankruptcy filing for inaccuracies.    

Russell A. DeMott is a Summerville Bankruptcy Lawyer who practices in the firm of Wyckoff & DeMott, P.C.

Tiffany N. Provence is a Summerville Family Law Lawyer who practices in the firm of Provence Messervy, LLC.

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