Understanding Divorce Debts, Bankruptcy and Empty Threats
Hi there, I am Professor Alex. Today, I will talk about an issue that always comes up: divorce debt, bankruptcy, and the threats that come with it, such as who will pay for what and who will deal with the divorce debts. You will see that the answer is straightforward, but it doesn’t change the fact that a lot of this has to do with emotional and psychological abuse. People often continue to believe what their spouses tell them. Of course, we now know that as gaslighting.
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Typically, the husband says he will take his spouse to the cleaners, make them pay for all the credit cards, and then file for bankruptcy. In my 24 years of experience and thousands of cases, I have always seen these threats. The threat is always the same: “We get divorced, you’re going to pay for all my debt. I’m going on a shopping spree, buying all this stuff, then filing for bankruptcy, and you’ll have to pay for it.”
Divorce Debt, Credit Cards Post-Separation, and Bankruptcy
Let’s put on the brakes for a second. You are not likely to pay all the debt, as this is a post-separation issue. Chances are, when you are separated, that debt belongs to that individual, just like their income belongs to them.
Another issue is long-term separations. For example, a client might say, “I’ve been separated for 15 years. I know nothing about my spouse’s finances. I’m about to buy a house.” Now, the client is worried their spouse will take half the house.
Post-separation, they haven’t contributed financially, and they haven’t done anything. Whatever income you have post-separation will be yours, just like any assets you buy, as long as you don’t use marital funds. You didn’t go into the marital bank account and pull out money to buy a brand-new car. If you did, that’s still considered a marital asset.
Now, let’s backtrack. What is separation? Don’t try to argue that you’re still living together in the same household. You should be separate: different houses, different everything. For those of you in my age category, I always use the example from the “I Love Lucy” episode where she divided the apartment in half, with one side belonging to Ricky and the other to her. That’s not separation. Separate households, separate everything.
Divorce and Bankruptcy
Now, let’s focus on the issue of living together. The shopping spree can be considered fraud or the dissipation of marital assets. If you can’t prove that any of the money was used for household expenses, chances are that the spouse will be stuck with the bill, even if both names are on it. But let’s say they’re separating, and there’s still a shopping spree. How is that handled, especially with the threat of filing for bankruptcy?
First, you can’t go on a shopping spree and then file for bankruptcy. That threat is an empty one, to say the least. It’s that simple. You can’t just buy a bunch of stuff, like a Rolex, and then file for bankruptcy the next day. It doesn’t work that way.
Now, are there times when a spouse gets into debt during separation, and the other spouse is responsible for those bills? Yes, there are exceptions to the rule. Typically, this happens if one spouse abandons the house and hasn’t paid any bills. The spouse who stayed behind might get into debt to pay utility bills, cell phone bills, and other expenses.
However, if someone is taking cruises, buying new cars, or joining a golf club, that debt won’t be something the other person can turn around and make you 100% responsible for by filing for bankruptcy. It just doesn’t work that way.
So, I’ve already gone over the exceptions post-separation. Don’t worry about it. Just make sure you have everything documented to prove that the debt isn’t household-related. This isn’t too difficult; you should be able to show this with bills and receipts. Forget about the empty threat of racking up credit card debt and then filing for bankruptcy to make you responsible for everything. It doesn’t work that way.
When clients come to me with these concerns, I ask them how many divorces or bankruptcies they’ve handled. Even if they’ve done both, they won’t come up with something a lawyer or judge hasn’t seen many times before. You’re not going to outsmart the system. So, the threat from one spouse who thinks they are “slick” or manipulative and can outsmart the system, whether a judge or lawyer, all I can say is good luck.
So, when facing these threats, take a deep breath, reach out to a lawyer, and understand that these threats often don’t make sense legally. To put it simply, it doesn’t add up. One easy way to handle these situations is to remove yourself from the equation and ask yourself, “Does this make sense?” Most likely, it doesn’t when you analyze the issue from a different perspective.
Thank you for joining me. Be safe and understand the issues at play with these empty threats of making you pay for the divorce debts. You got this!
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link.
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This transcript was edited for clarity.
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