This is one of the most common questions that we get asked. Inevitably, financial problems very often lead to marital problems. And a large percentage of our clients are either separated or in the process of divorcing. While every situation is unique, it is always wise to seek the advice of a bankruptcy attorney prior to finalizing and signing your divorce documents.
One main reason is a very common provision in most divorce documents called “Hold Harmless”. Amy Tanner in our Huntsville office wrote a wonderful article on Hold Harmless, which can be found here. In a nut shell, Hold Harmless language means that you are agreeing not to “harm” your soon-to-be ex-spouse for debts that you agree to pay in the divorce. This is a very important concept to understand. If you agree to take responsibility for certain joint debts as part of your divorce and then later file bankruptcy on those debts, your ex-spouse could sue you in Divorce Court to make you pay those very same debts.
The reason this is so important is the way in which divorce typically works. In the beginning, you may be determined to not give an inch. You may have been hurt or scorned and in your mind you are never going to compromise. However, two years and thousands of dollars later, you may be far more willing to sign just about anything in order to get the divorce final. That is where Hold Harmless language creeps in and that’s where Hold Harmless can become dangerous. By agreeing to pay for certain joint debts with Hold Harmless language, you may be eliminating most of the benefit of filing for bankruptcy protection in the future. Whereas, by filing for bankruptcy prior to finalizing your divorce can often eliminate the need to assume joint debts and eliminate Hold Harmless language all together.
If you are having financial problems and are considering divorce, schedule a free, no-obligation appointment with a local Bond & Botes attorney. We will evaluate your situation and advise you as to the most appropriate and beneficial course for you to take.
- Divorce After Bankruptcy
- File Bankruptcy on Debts from a Divorce
- Can You Escape Alimony Payment in Bankruptcy
Don Lawson is the Office Manager of the Bond & Botes Law Offices location in Knoxville, Tennessee. He holds degrees in both Accounting and Finance that he’s put to use analyzing complex business bankruptcy cases for the firm. Read his full bio here.