Filing Bankruptcy To Avoid Ex-Spouses' Bills

In the Chapter 7 bankruptcy case of Taylor, Anthony; In re, the bankruptcy court dismissed the debtor’s case because it was ruled abusive of the bankruptcy system.

The details of the bankruptcy case:

“The Chapter 7 debtor admitted that his case was presumptively abusive, but argued that he needed to file due to the impending foreclosure sale of his former marital residence. When the debtor and his wife divorced, she received the house and was required to make the mortgage payments. Although she was required to hold him harmless on the obligation, she failed to do so and filed for bankruptcy to discharge her personal liability on the mortgage. The debtor said the property’s sale was unlikely to satisfy the mortgage. He feared being held liable for a deficiency of $10,000 or more. The court noted that this potential deficiency was the debtor’s only unsecured debt. The debtor also said he should be entitled to an additional monthly expense of $1,048 for his current spouse’s mortgage payments.”

The bankruptcy court ruled that the debtor’s situation was not a “special circumstance” such as a debtor facing a serious medical illness or a call to active duty in the Armed Forces.  The court further said that they could not allow an additional expense for the $1,048 mortgage payment for the debtor’s former spouse. The bankruptcy case was dismissed.

Filing bankruptcy after divorce can become very complicated. Sometimes if an ex-spouse beats you to the bankruptcy court, you could end up “holding the bag.”  If you are considering a divorce, it is important to look at all of your debt obligations.  How will these obligations be split?  Should you file bankruptcy before the divorce?  If you and your spouse have a large amount of debt, you may want to speak with a bankruptcy attorney before your divorce is finalized.