What You Need To Know About Divorce and Bankruptcy

How Bankruptcy and Divorce Affect Each Other

Divorce and bankruptcy often coincide. Sometimes, money problems build up during a marriage — missed mortgage payments, growing credit card balances, or medical bills — and the stress spills over into the relationship. 

Other times, the divorce itself creates new financial pressure. Splitting into two households means paying for two sets of rent or mortgages, utilities, groceries, and transportation costs. Add in legal fees for the divorce and possible changes in income or child support payments, and it’s easy to see how debt can pile up quickly. 

For many people, bankruptcy becomes a tool to get relief and start fresh after (or even during) this transition.

Why Timing Matters for Both Processes

The order you file matters because bankruptcy and divorce affect each other in ways you might not expect. 

✋ When you file for bankruptcy, the automatic stay goes into effect. This court order temporarily stops most lawsuits and collection actions, which can bring a lot of relief. But it can also pause parts of your divorce case until the bankruptcy is over.

If you file bankruptcy before or during the divorce, you and your spouse may need to work together on your bankruptcy paperwork and court appearances. That can be a benefit if you’re on good terms, but it can also be a challenge if communication is strained.

Filing bankruptcy after the divorce avoids that joint work but can limit your options for protecting property or wiping out certain debts. 

⏰ Choosing the right timing depends on your relationship with your spouse or ex, your types of debt, and whether you need the speed of Chapter 7 or the repayment flexibility of Chapter 13.

Key Differences Between Chapter 7 and Chapter 13 in Divorce Situations

Chapter 7 and Chapter 13 are the two most common types of personal bankruptcy, but they have some real differences.

Chapter 7 is often the faster, simpler choice. It can erase many unsecured debts, like credit cards or medical bills, in about 4–6 months. 

👉 This speed can be helpful if you want to get bankruptcy out of the way before finalizing a divorce. 

However, Chapter 7 doesn’t give you extra time to catch up on mortgage or car payments. You have to be current to keep those assets.

Chapter 13 works differently. It’s a 3–5-year repayment plan that can help you catch up on secured debts, lower car loan balances, or pay off certain debts over time.

It also allows you to discharge some property settlement debts from a divorce that Chapter 7 can’t erase. The downside is that Chapter 13 ties you into a long-term plan. 

👉 If you file Chapter 13 before or during your divorce, you and your spouse may be financially linked for years. This can complicate both the bankruptcy and the divorce process.

How Your Divorce Decree Impacts Bankruptcy

A divorce decree is the final court order that ends your marriage. 

📚 Depending on where you live, it might be called a judgment of divorce, decree of dissolution, or something similar. 

It’s often several pages long and may include other documents, like a property settlement agreement or a parenting plan.

The decree spells out:

• Who gets what property (property division orders)

• Who is responsible for certain debts (debt division orders and joint debts)

• Whether one spouse must pay the other support

📃 In bankruptcy, this document is a big deal. Your bankruptcy trustee will likely ask for a copy, and you must send it at least seven days before your meeting of creditors. The decree helps the trustee understand your financial situation, see which assets you now own, and confirm your obligations to your ex-spouse.

Property Division Orders

One part of the decree lists how your marital property was divided. 

This could include your home, vehicles, bank accounts, retirement savings, or personal belongings. In bankruptcy, you must list all property awarded to you — even if you owned it before the divorce — on your bankruptcy schedules.

If you no longer have something you were awarded, you’ll need to explain what happened to it. For example, if you sold the item or gave it away in the past two years, you’ll have to disclose that in your bankruptcy paperwork.

Debt Division Orders and Joint Debts

Another part of the decree explains how marital debts are divided. This can include mortgages, car loans, credit cards, and personal loans. 

In bankruptcy, you must list all debts from the decree, even if the decree says your ex-spouse is responsible for them.

If you live in a community property state, you may need to list debts from your marriage even if they’re not in your name, because creditors may still see you as responsible. 

💡 A community property state is one where most property and debts that a married couple acquires during the marriage are considered jointly owned by both spouses, no matter whose name is on the title or account.

Your bankruptcy forms should also note how each debt was assigned in the divorce.

Indemnification (‘Hold Harmless’) Clauses

Some decrees contain a clause that says if your ex ends up paying a debt assigned to you, you must reimburse them. This is called an indemnification or hold harmless clause.

Here’s why it matters: Bankruptcy might wipe out your obligation to the creditor, but it usually doesn’t erase your obligation to your ex under the divorce order. 

If you fail to reimburse them, you could be in contempt of court. That can mean more legal trouble even after bankruptcy.

Property Settlement Debts vs. Support Debts

Not all divorce-related debts are treated the same in bankruptcy.

• Support debts — child support and true alimony — can’t be discharged in Chapter 7 or Chapter 13. You’ll still owe them after your case ends.

• Property settlement debts — money you owe your ex as part of dividing assets — can’t be discharged in Chapter 7 but can be discharged in Chapter 13. Even in Chapter 13, though, you may still have to pay part of these debts through your repayment plan.

Understanding which category your debts fall into can help you decide which bankruptcy chapter might work better for you.

If all this feels complicated, consider setting up a free consultation with a bankruptcy attorney to get some clarity and legal insight into your specific situation.

Should You File Bankruptcy Before, During, or After Divorce?

The timing of your bankruptcy can make a big difference in how smooth or complicated both your bankruptcy and your divorce will be. Each option has its own pros and cons.

Filing Before Divorce

Filing before your divorce is final can make sense if you and your spouse are still able to cooperate.

Here are some possible benefits and drawbacks:

• ✅ You may save money. In a joint bankruptcy, you pay one filing fee and, if you hire a lawyer, one attorney fee.

• ✅ You can wipe out joint marital debts together. This can make dividing property during divorce much simpler.

• ✅ You may be able to double exemptions in some states. Some states let married couples filing jointly protect twice as much equity in property.

• ❌ Your divorce will be delayed. As soon as you file bankruptcy, the automatic stay stops most court cases until the bankruptcy ends. This includes divorce proceedings. In Chapter 7, that’s about 4–6 months. In Chapter 13, it could be 3–5 years.

• ❌ You’ll have to work together. A joint bankruptcy requires cooperation on paperwork, financial disclosures, and the meeting of creditors. If tensions are high, this may be too stressful.

Filing During Divorce

Filing bankruptcy while your divorce is in progress is usually the most challenging option.

You’re still legally married until the divorce is final, so you’ll have to include your spouse’s income and expenses in your bankruptcy forms. That can raise your household income for the means test or increase your Chapter 13 plan payment.

The automatic stay can pause your divorce for months or years, depending on the bankruptcy chapter. If you file a joint Chapter 13 case, you’ll be financially linked to your spouse for 3–5 years, which can create serious conflicts if your relationship is strained.

Still, in some situations it may still make sense, especially if:

•  You’re about to lose a home or car and need the immediate protection of Chapter 13.

•  Your spouse isn’t responsible for your debts and you don’t live in a community property state.

Filing After Divorce

For many people, waiting until the divorce is final is the simplest way to handle bankruptcy. 

Once the court has divided your property and debts, you know exactly what’s yours to list in your bankruptcy forms. You only have to include your own income and expenses, which can make the paperwork more straightforward. And because the divorce is behind you, you don’t have to coordinate with your ex on financial disclosures, documents, or court appearances.

There are trade-offs, though. You’ll miss out on the ability to “double” certain property exemptions that married couples filing jointly can use in some states. And if your divorce decree says you must pay a specific debt, that obligation still stands — even if bankruptcy erases your legal responsibility to the creditor. Failing to pay could land you in contempt of the divorce court, which is a separate legal problem no one wants.

Special Considerations for Chapter 7 and Divorce

Chapter 7 bankruptcy is the quickest type of personal bankruptcy. It’s often used to wipe out unsecured debts in just a few months. But when divorce is part of the picture, there are extra factors to consider before you file. 

The way you and your spouse (or ex-spouse) choose to file can affect your legal costs, the property you keep, and even how smoothly your divorce moves forward. It’s important to think through both the benefits and the risks so you don’t end up with unintended consequences.

When Joint Chapter 7 Makes Sense

Filing a joint Chapter 7 can make sense if you and your spouse are on reasonably good terms and want to tackle shared debts before finalizing your divorce. By filing together, you save money on the court filing fee and, if you hire one, the attorney fee. 

In many states, joint filers can “double” certain property exemptions, which means you may be able to protect more assets.

Clearing out marital debts before you go your separate ways can simplify property division in your divorce. You’ll have fewer financial obligations to divide, less to argue over in court, and a smaller chance that one of you will get stuck paying for a debt the other stops paying after the divorce.

How Chapter 7 Handles Marital and Joint Debts

In Chapter 7, most unsecured debts — such as medical bills, credit cards, and personal loans — can be discharged. If you file jointly, you and your spouse both get relief from the debts listed in your case. That means creditors can’t collect from either of you once the case is over.

If you file individually, you’ll only erase your legal responsibility for the debts in your name. Any joint debts will remain collectible from your spouse, which can put financial pressure on them. And if your divorce decree assigns you a specific debt, remember that bankruptcy might wipe out your duty to the creditor, but it usually doesn’t erase your obligation to your ex under the divorce order — especially if there’s an indemnification clause requiring repayment.

Risks of Losing Property in Chapter 7

Although most Chapter 7 filers keep everything they own, the process is sometimes called “liquidation bankruptcy” because the trustee can sell non-exempt property to pay creditors. Exemptions are laws that protect certain types and amounts of property, but they don’t cover everything.

In a divorce context, this can be especially important. If you or your spouse own valuable assets — like a home with a lot of equity — and those assets aren’t fully protected, the trustee might sell them. Even if your divorce decree awards you a piece of property, that doesn’t automatically protect it in bankruptcy. It’s the exemptions, not the divorce court order, that determine whether you keep it.