It is not easy to deal with both divorce and bankruptcy at the same time as the two cases are challenging.
Every process comes with its own legal issues and stress and when one piles on the other it becomes very complex and messy when it comes to financial and emotional issues.
This is a common situation in South Carolina, especially when the problems in marriage are a result of financial issues and it is hard to separate the two.
Specifically for couples with too much debt and emotional stress of a failing marriage, it is often a question of whether to file for both simultaneously.
Divorce Laws in the State of South Carolina
The grounds for divorce in South Carolina are stated under the fault and no-fault system. Some of the legal prerequisites that people need to fulfill before getting a divorce include residency requirements; any of the couple must have resided in the state for a year or both have to have resided in the state for three months.
Grounds for Divorce
As has been mentioned, divorce can be filed on the grounds of fault and grounds of no fault.
The no-fault ground is based on separation for a continuous period of not less than one year. Fault-based grounds include:
- Physical cruelty
- Drunkenness or drug and substance abuse
The Divorce Process
The grounds for filing a complaint are that one of the partners wants to dissolve the marriage and go to the Family Court to start a divorce.
This paper explains the grounds for filing for a divorce and shows matters such as property division, alimony, custody, and support. The duration of the process is not set, but the one-year separation for no-fault divorces is required unless fault is established.
Overview of Bankruptcy Options
When facing overwhelming debt, individuals in South Carolina typically consider two main types of bankruptcy: Chapter 7 and Chapter 13 or 11.
They all have different conditions of eligibility and the impact it has on both debts and assets especially if divorce is an option.
Chapter 7 Bankruptcy
Chapter 7 also known as ‘liquidation bankruptcy’ enables the debtor to erase most of his/her unsecured debts like credit card balances and unpaid medical bills.
In exchange, non-exempt assets can be sold to pay the creditors. This process is not very lengthy and may take several months only and is ideally suited for persons with negligible income.
Chapter 13 or 11 Bankruptcy
Sometimes it is called ‘reorganization bankruptcy,’ Chapter 13/11 enables debtors to retain their property while coming up with a plan to pay off the debts within a period of 3-5 years.
This option is for persons with a fixed income who are able to make payments to the creditors as and when due. Chapter 13/11 is longer and more detailed than Chapter 7; however, it can prevent people from losing assets such as a house.
Effect of Bankruptcy on Divorce Process
Bankruptcy during divorce is not easy especially when it comes to the distribution of property, stay order, and other issues to do with alimony and child support.
These legal and financial connections can change or even stop the result of both actions.
How Filing for Bankruptcy Affects the Division of Assets
It is important to note that when a spouse files for bankruptcy, then it will affect the distribution of the property in case of a divorce.
With Chapter 7 bankruptcy, the property that could be divided during divorce may be sold to pay the debts because non-exempt property is sold to pay creditors. This is because the bankruptcy trustee is in charge of the liquidation process, and the resultant distribution of assets is likely to be less compared to what both spouses have to share.
In Chapter 13 bankruptcy, the debtor makes the proposal of the payment plan, and the marital property stays with the filer.
However, the division of these assets can become complex if both parties have obligations with the repayment plan as it defines what is disposable income and available assets.
Bankruptcy and its impact on spouse and child maintenance
Bankruptcy can eliminate many kinds of debts, but it can’t eliminate the debts regarding spousal support or child support.
These are considered as non-dischargeable debts in both Chapter 7 and Chapter 13 bankruptcy, this means that even though some other debts might be discharged the filer is still expected to make payments towards these debts.
As it is with Chapter 13, the payments for support of a spouse or child are also considered as having a higher priority than other debts in the Chapter 13 plan.
If the filer fails to make these payments, it creates additional issues in both bankruptcy and divorce since family courts regard these obligations as critical and can compel the non-paying party to have the amount deducted from wages or other sources.
Filing Both Divorce and Bankruptcy at the Same Time
Filing for both divorce and bankruptcy at the same time might appear as the most reasonable action for couples with a lot of problems in marriage and a lot of debts.
However, as the two processes are related but different, there are certain difficulties in their management and, possibly, the advantages.
It is therefore important for the couples to understand the legal and financial implications that come with the simultaneous filing for divorce.
Challenges of Managing Both Processes at the Same Time
It is always complicated to file for divorce and bankruptcy at the same time because both procedures imply crucial legal and financial choices.
The automatic stay that comes with bankruptcy can also put a temporary freeze to a divorce case, especially in cases of property division.
Also, the family court and the bankruptcy court can become the parties that will review the financial aspect, which causes additional time and pressure.
It is therefore important that there is synergy between the bankruptcy attorney and the divorce attorney.
Every court has its own procedures and time schedules and it is very easy to fall foul of the legal processes and end up losing out on properties or being caught in a bind over who owes what.
Legal and Financial Implications when Filing Both
Filing for both divorce and bankruptcy simultaneously presents unique legal and financial challenges.
Understanding these implications is essential for navigating asset division, debt responsibility, and support obligations effectively.
Automatic Stay
When a bankruptcy is filed, the automatic stay puts a stop to all proceedings of collection of debts including division of assets in the process of divorce.
However, issues such as child and spousal support are usually ongoing and therefore do not stop with the dissolution of marriage.
Division of Property
Bankruptcy may also hinder the ability of the family court to distribute the marital property since the property may be considered part of the bankruptcy estate.
Some of these assets may be non-exempt and may be sold to clear debts; this means that couples may have little to divide among themselves.
Joint Debts
If both spouses are equally responsible for the debts, then it is easier to file for bankruptcy and discharge them.
However, if one files for divorce, the other may be liable for the marital obligations even if he or she has not filed for divorce.
Pros and Cons of Filing Both Divorce and Bankruptcy at the Same Time
Filing for divorce and bankruptcy at the same time can be a practical solution for couples facing both financial strain and marital breakdown.
However, this approach comes with distinct advantages and potential drawbacks that must be carefully weighed before proceeding.
Pros:
Filing for both divorce and bankruptcy at the same time offers several key advantages.
It can simplify the debt resolution process, reduce costs, and provide a fresh financial start for both spouses as they transition into their separate lives.
Simplified debt resolution
Paying off debts through bankruptcy before the division of property may help to decrease the number of financial conflicts during divorce.
Cost efficiency
Joint bankruptcy petitions are less expensive, especially the legal fees and the court costs.
Debt discharge
Joint debts can be discharged by bankruptcy thus ensuring that one party is not stuck with the bills after divorce.
Cons:
Filing for both divorce and bankruptcy simultaneously also comes with notable disadvantages.
The complexity of managing both processes can lead to delays, increased legal challenges, and potential loss of assets, which may complicate the overall resolution.
Delays
The automatic stay in bankruptcy can also postpone the division of assets, which will also affect the time it takes to complete the divorce.
Legal complexity
It is always difficult to go through two legal processes simultaneously, especially when one is not represented by a lawyer.
Potential asset loss
These are assets that are likely to be divided in the divorce and may be sold when one of the parties files for bankruptcy and there are limited resources to go around the two parties.
Consulting an Attorney for Combined Legal Issues
Divorce and bankruptcy are two different areas of law that should be handled by a family law attorney as well as a bankruptcy attorney.
All specialists contribute their knowledge to deal with the challenges of the management of both processes.
It is advisable to seek legal advice from lawyers who are conversant with both branches of the law so that they can come up with legal measures that will enable you to recover your losses and have the two issues resolved as soon as possible.
There is a way in which the legal aspect of the divorce and the bankruptcy can be well coordinated so that there is a smooth flow of the procedures regarding the division of the properties and the discharge of debts.
The Max Hyde law firm has a vast record in practice that deals with divorce and bankruptcy cases and presents solutions that meet your needs. Please call (864) 804-6330 for a free consultation to find out how we can help you during these difficult times.
