Debt and Divorce – Article provided by Debt Advisors, S.C.

People find themselves facing financial difficulties for many reasons; currently, one driving factor in bankruptcy filings is divorce.

December 29, 2011 /24-7PressRelease/ — According to a recent study in the Journal of Law, Economics and Organization reported more “households would benefit financially from bankruptcy than actually file.” Although no one anticipates filing for bankruptcy, for some it is a viable option for future financial success. The Wisconsin State Bar outlines the following benefits associated with bankruptcy: – Keeping all or most property – Easing credit card debts – Avoiding certain liens and involuntary transfers The Bar also cautions consideration of the disadvantages prior to filing. Including that some debts are not dischargeable and that filing for bankruptcy may negatively impact a debtor’s credit history. People find themselves facing financial difficulties for many reasons. ABC news reported one driving factor in bankruptcy filings was divorce. Divorce results in one set of household expenses splitting into two, and can often leave one spouse without health insurance. As a result, divorce can lead to overwhelming bills. Wisconsin as a Community Property State When considering bankruptcy while going through a divorce, there are some important things to keep in mind. The first is that Wisconsin has a unique set of property laws that only eight other states in the country follow, as noted by the IRS. This system, called community property, assumes “each spouse contributes labor (and in some states capital) for the benefit of the community, and shares equally in the profits and income earned by the community.” As a result, the rules for property division are often more complex. Division of Debt in Divorce Community property states focus on equal contributions not only towards profits and income, but also towards debt. Each spouse is liable for community debts until the divorce is finalized. A spouse’s signature or even awareness of the debt may not be required. As long as the debt was for the benefit of the marital community, each spouse is liable. A marital community is present after the marriage but before legal separation. Any debts incurred outside of this time frame are not considered community debts. Wisconsin law holds community property estates terminate once divorce is finalized. However, it is important to note that termination does not occur until the final decree is issued. Until that point, each spouse may be liable for the other’s debt. As a result, it is important to discuss your situation with a knowledgeable bankruptcy attorney who can help advise you of your best legal options.

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