Money and marital problems often go together. 25% of couples experiencing separation or divorce cite financial difficulty as the #1 cause. When money is an issue, tension and arguments in a relationship increase. Sadly, couples are fighting over credit card or medical bills, gambling debts, IRS deficiency, overdue loans, eviction and foreclosure notices.
When debts turn into a permanent civil or criminal judgment, multiple small claims court actions, or repossession of a car and foreclosure – that’s when things get serious and one of the spouses or both spouses need to consider getting advice in either Chapter 7 or 13 bankruptcy to make sure their marriage survives.
First, both spouses must usually file Chapter 7 bankruptcy to have debts discharged; otherwise, a non-filing spouse would become responsible for a debt they owed jointly. In Chapter 13 bankruptcy, if only one spouse files they will be protected by the Chapter 13 “co-debtor stay” of protection while it allows the other spouse to pay off the joint debt through a confirmed bankruptcy repayment plan.
Benefits of Filing Bankruptcy Together
Married couples can file for bankruptcy jointly, meaning all their collective debts and assets are considered together and you get DOUBLE the amount allowed for exemptions and keep that asset up to that amount. In Connecticut, where home prices are high, you may exempt a homestead valued up to $150,000 if you file together, instead of $75,0000 if you file Chapter 7 or Chapter 13 bankruptcy by yourself.
Even if the relationship doesn’t survive, a divorce proceeding can be a big advantage. Bankruptcy law allows couples to file jointly as long as they are still legally married, meaning the divorce isn’t final in Connecticut yet. Even if couples have already filed for divorce, they can still file jointly and both receive the benefit of either debt discharge or debt consolidation and repayment.
Most couples are able to agree how they’ll divide their marital property, while others use the help of lawyers or mediator to negotiate. Connecticut law requires the division of property in divorce to be equitable, i.e. it must be fair but not necessarily equal.
Marital Property and Separate Property in Connecticut [CT]
Connecticut courts usually treat property a couple acquires after marriage as “marital property”. However, judges can also divide not just marital property but all of both spouses’ property, regardless of which spouse actually owns it or when it was acquired in a manner that is fair. Separate property owned before a marriage, or if acquired by gift or inheritance, can be divided but only if the court finds it fair and necessary to asset distribution. Otherwise, that property or non-marital assets is awarded back to its original owner.
Determining who owns what becomes difficult when for example, there is a premarital bank account belonging to one spouse to which the other spouse has made deposits, or a house owned by one spouse can become marital property if both spouses pay the mortgage and expenses. The couple must also assign all debt accrued during the marriage, including mortgages, car loans, and credit card debts, to one spouse or the other.
Bankruptcy attorneys at Beckett Law, LLC can help spouses make decision or work collaboratively with their divorce attorneys, so there aren’t expensive hearings to attend where a judge makes decisions about premarital vs. commingled property or who incurred what debt and when, keeping the following factors in mind:
• length of the marriage and asset contributions of each spouse to the marriage
• appreciation of marriage assets and amount and sources of income
• current liabilities and needs
• age, health, occupation, vocational skills and employability
• opportunity for future acquisition of capital assets and income
There is no real formula for determining what is fair in a divorce – every case depends on the facts and circumstances of each situation.
Assigning Value to an Asset Valuation
If spouses can’t agree, appraisals often help a couple assess the value of items. It gets expensive to have lawyers go to court hearings to argue about valuation. In Connecticut, there are many appraisers who help determine the value of real property such as artwork, family heirlooms, jewelry and antiques. On the other hand, retirement assets may require the assistance of a CPA, actuary or financial analyst.
Property Division or Holding Property Together
After valuations are done, certain items may go to each spouse or the asset must be sold with a division of proceeds. In many family scenarios, divorcing couples agree to keep the family home until their children are no longer in school. However, whether a family home is kept or an investment property is maintained due to rising values, it will require ongoing interaction with an ex-spouse which must be factored in.
Let our bankruptcy lawyers at Beckett Law, LLC help you get started by making an appointment now. It doesn’t matter where you live (Avon, East Hartford, Glastonbury, Manchester, Newington, New Haven, Rocky Hill or Waterbury) our service area allows us to travel to any of the 3 bankruptcy courts in Connecticut.