Many people have asked if it is possible to discharge all debt when filing
for bankruptcy. This includes the debt that they owe as the result of
a settlement during a divorce. The law is quite clear in this regard:
It is not possible to discharge debts that are considered to be 'domestic
support obligations'. This means that any settlement made during a
divorce will still stand as part of the debtor's responsibility.
Domestic support obligations can range from alimony payments and child
support or maintenance, to any other amount that is used to support a
spouse or the children of the debtor. These financial obligations are
of an ongoing nature and they directly support the spouse and/or children
in terms of the divorce agreement.
There may be instances though, when some of the debts caused by the divorce
or relating to the divorce may be judged to be dischargeable debt, as
long as they are not related to the ongoing domestic support agreement.
It may even be possible to discharge any debt that it related to a divorce,
as long as it does not affect the ongoing support payments. It may also
depend on the type of bankruptcy that the debtor is filing.
It may be possible to discharge divorce debt that relates to assets as
well as to the attorneys fees that have been incurred by divorce. A bankruptcy
attorney will be able to advise you of the intricate details of the discharge
of debt in a bankruptcy and how it relates to the debts incurred during
a divorce. When a debtor files for bankruptcy in Chicago without their
spouse, the separate property cannot be listed as part of the bankruptcy estate.
Sometimes, it is wise to keep finances separate during a marriage, especially
if they are an inheritance or gift that is given to one spouse. If the
amount is deposited into a joint bank account it can be extremely difficult
to prove that it should be listed as separate property. Facing bankruptcy
does not have to mean that everything will be included in the estate.
After the estate has been divided, the law states that all of the debtors
separate property and at least 50% of the joint property will form part
of the bankruptcy estate. A good bankruptcy attorney will be able to advice
of the difference between community property and separate property and
how they can affect bankruptcy filing.