How Does Bankruptcy Affect Property Division in an Illinois Divorce?

 Posted on December 00, 0000 in Bankruptcy

Getting a divorce can be stressful, not only emotionally, but financially as well. If one spouse did not work during the marriage, the thought of being on his or her own can be particularly daunting. In some marriages, one spouse may have dissipated or hid assets, or even accumulated a significant amount of debt. In addition to property and assets, any marital debt will need to be divided equitably in an Illinois divorce. If you are struggling to make ends meet, filing for bankruptcy before your divorce may put you in a better financial situation in the future. However, although the Illinois divorce court can determine issues such as child custody, parenting time, child support, and spousal maintenance, it cannot divide property in the bankruptcy estate. In some cases, bankruptcy proceedings can delay the division of property in divorce proceedings.

What Are the Different Types of Bankruptcy?

Bankruptcy is a legal process that essentially allows an individual who has any debts that are more than his or her assets to start over financially. The debts can be reorganized to make them easier to pay, such as dividing the debts into smaller amounts that can be paid over a longer timeline. In other situations, the debts may be eliminated completely.

In Illinois, there are four legal types of bankruptcy that involve consumers, but most people file bankruptcy under Chapter 7 (liquidation) or Chapter 13 (reorganization). In a Chapter 7 bankruptcy, debts are paid by the profits from the sale of the property, and any outstanding debts are completely erased. In Chapter 13 bankruptcy, debts are reorganized into a repayment plan that is affordable.

Equitable Distribution of Property and Debts

Under Illinois law, any property acquired during the marriage is subject to equitable distribution. That means the marital property will be divided fairly, but not necessarily equally. This applies to the obligation for the marital debts as well. For example, if a couple has a large credit card debt or significant car loans, those obligations will be divided between them but may not be distributed equally. However, both spouses may be responsible to pay off the creditors according to the purchase agreement or loan even if the debt is allocated to only one spouse in the divorce settlement.

Each divorce is unique, so couples should consider the potential advantages of filing jointly for bankruptcy before filing for divorce. This will depend on whether or not both spouses qualify for bankruptcy as well as the type of debts that are owed. It is also important to note that certain kinds of debts cannot be forgiven. A skilled attorney who knows divorce and bankruptcy laws can help explain the legal options that are available to divorcing couples.

Contact a McHenry County Bankruptcy Lawyer

A divorce can have a significant financial impact on both spouses. In some scenarios, filing for bankruptcy can help alleviate some of the stress due to money issues. At the Thomas Law Office, Attorney Colleen Thomas has more than 25 years of experience representing clients in divorce and family law matters. Our seasoned Kane County bankruptcy attorneys understand the complex nature of bankruptcy laws and how they impact divorce cases. Call our office today at 847-426-7990 to schedule your private consultation.

Sources:

https://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=100-0422

https://www.ilga.gov/legislation/ilcs/ilcs4.asp?ActID=2086&SeqStart=6000000&SeqEnd=8300000