Divorce and bankruptcy go together like peas and corn since filing bankruptcy first simplifies the divorce. Once both parties file bankruptcy, there is no need to divide up discharged debt. It is also great to get a fresh financial start as we move in to the next chapter of our lives. Couples on good terms will often go through bankruptcy together before getting divorced. If there is a conflict of interest like a lack of agreement over custody, support, visitation, property distribution etc., then a joint bankruptcy does not work.
|Divorce & Bankruptcy with Jeff|
Jeff handles both Iowa Bankruptcy and divorce. If you file bankruptcy single filer (which is common for married Iowan's to do) Jeff can also handle your divorce. If you file bankruptcy jointly before divorce, Jeff would refer you to another divorce attorney since it is a conflict of interest for Jeff to take an adverse position against your spouse having just represented them in bankruptcy.
Most often, we file the bankruptcy first since it simplifies the divorce. When one spouse files bankruptcy, often the other will too since they would be left with all of the joint debt, this way both get a fresh start along with the divorce. If there is an existing conflict of interest with your spouse, they will need a 2nd bankruptcy attorney to handle their case since Jeff's loyalty would be to you and should not be divided.
So if you would like Jeff to handle both your bankruptcy and divorce, you would file a single (and not joint married) bankruptcy and then Jeff would have no conflict of interest in representing you for the divorce as well. Jeff also handles bankruptcy on an affordable fixed fee!
Iowa Bankruptcy Basics
About 90% of Iowan’s file a Chapter 7 full discharge. Chapter 7 allows you to keep your home, car, furniture, appliances, retirement accounts and most other property. The vast majority of Chapter 7 cases are “no asset”, meaning you don’t lose anything and no assets are distributed to your creditors. The most common asset case is for tax refunds, mostly for cases filed late in the calendar year, so be sure to ask your attorney about bankruptcy and tax refunds, especially if you are filing after about September 1st when most of your refunds have been earned.
You can discharge credit cards, medical debt, repo and foreclosure debt and most other consumer debt including judgments. You can stop wage garnishment, sometimes you can get some of the recently garnished funds back. The main non-dischargeables are back taxes although some older ones can be discharged, student loans and child support. Prior to 2005, private student loans could be discharged, but we lost that with the Bankruptcy Abuse Prevention and Consumer Protection Act (2005),
The most common reason people file a Chapter 13 (Repayment) is their income is too high to qualify for Chapter 7. Chapter 13 involves 5 years of repayment of at least part of your debt.
Lenders are Not Bound by your Divorce Decree
Since Capital One is not a party to our Iowa dissolution proceeding, they are not bound by the divorce decree anyway. This means that even if our spouse is required to pay them in the divorce, Capital One can still come after us if our spouse does not. The Iowa divorce decree just settles things between the two parties in court, not between the spouses and Capital One.
Joint Bankruptcy or Solo?
If you are in agreement with your spouse about child custody and support, property division etc. than you may not have any conflicts of interest. In this case, people often file a joint bankruptcy before the divorce.
If you do have a conflict, under our Iowa Attorney Ethics Rules no one attorney can represent you both. To do so could put the attorney in the impossible position of trying to serve two masters, meaning at least one and perhaps both would not be properly represented.
If you are on good terms with your spouse, you may find that you can file a joint bankruptcy just fine and then proceed on to a amicable divorce with no need for a trial or the high attorney fees and costs that go along with it. Divorce however is an inherently adversary process, so if Jeff represents a couple in a bankruptcy, he cannot represent either one of them against the other in a future divorce. This is because he has a loyalty to both spouses from the bankruptcy and would not want to use knowledge gained during the bankruptcy against either spouse in the divorce case. But Jeff can refer you to an Iowa divorce lawyer. Of course if Jeff represents just one spouse in bankruptcy, he can also represent that client in a divorce.
Income Eligibility for Bankruptcy can get Easier with Divorce
Since you can claim as a member of your household children who either live with you or you support, both parents can usually count the kids in their household once separated or divorced. So some people that may have difficulty qualifying for Chapter 7 full discharge while in the same household will become eligible once they are apart.
One Spouse Files Bankruptcy, the Other Does Not
If one spouse files bankruptcy, that spouse is no longer responsible for discharged debt including joint debt like credit cards. If the other spouse is on the account, they are still responsible for the debt unless they too file bankruptcy.
If you were ordered in your divorce decree to pay the other parties attorney fees, that debt is not discharged in bankruptcy. See Van Aken v. Van Aken, 2005 Fed APP 0001 (6th Cir.)
If you would like to get started on bankruptcy or just ask questions, email Jeff. You can also check Jeff’s Iowa Bankruptcy Law website. Jeff offers an affordable fixed bankruptcy fee and free consultation. Return to Main Des Moines Divorce Page. Our firm files divorce cases in these Iowa counties.
Bankruptcy and Divorce Questions and Answers
Will I lose my home?
Iowa has an unlimited homestead exemption, so you can keep your home as long as you keep making the payments. Or you can surrender and walk away even if you owe more than it is worth?
Are spouses required to file together?
No. Many married Iowan’s file bankruptcy solo.
Can a couple about to divorce file a joint bankruptcy?
If there are conflicts of interest, a joint filing is not possible, but if all issues in the dissolution including child custody, support, property distribution etc. have been resolve, it is possible for Iowans to file joint bankruptcy prior to divorce and is saves a lot of money. One more reason to stay on good terms! See Iowa Bankruptcy Law Basics.
How long does it take?
Bankruptcy is fast in legal terms, from the day of filing to discharge, Chapter 7 takes about 3 1/2 months.
Will I ever get credit again?
It takes about 2 years to get a good interest rate on a home purchase after bankruptcy.
What debt can be discharged in bankruptcy?
Credit cards, medical and most other consumer debt discharge.
How about private student loans?
Since 2005, private loans have not been dischargeable either.
What about the “undue hardship” student loan discharge.
Courts interpret undue hardship very narrowly. Especially if your lender offers Income Contingent Repayment, it is very unlikely a Judge would discharge your student loans. In order to try a student loan discharge you must file a lawsuit within your bankruptcy and it is very expensive, too expensive given the high failure rate.
Can I discharge judgments?
Yes, judgments discharge just like other debt.
Additional Resources on Family Law & Bankruptcy
For more information, see Iowa State Bar Association: Bankruptcy Law, Forbes, When Divorce Meets Bankruptcy. See Nolo on Bankruptcy & Divorce Filing. Jeff’s Des Moines Bankruptcy website goes into much more detail on how to qualify and complete your Iowa fresh start. Iowa Bankruptcy Exemptions include the home and cars. Under the bankruptcy code, Child Support does not discharge when filing bankruptcy. Struggling with Child Support? Chapter 13 bankruptcy can help on catching up on child support. If you have low income, you may qualify for family law assistance from Iowa Legal Aid.