Bankruptcy and Divorce: Get Out of Debt before Getting Out of Marriage

By Haily Kolberg
Attorney At Law
The Gasper Law Group, PLLC

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We’ve all heard the phrase “drowning in debt.” We’ve also heard the phrase “treading water.” If, when it comes to your debt, you are “treading water” but know you’ll soon get divorced, this article is for you.

Jack and Jill are getting divorced. They have approximately $30,000 in debt due to credit cards and unpaid medical bills. In the state of Colorado, debt acquired during the marriage, like their medical bills and credit cards, is normally treated as debt of the marriage, even if it was acquired by only one spouse and not the other. When Jack and Jill’s family splits into two, the household with the least income is hurt more financially. If Jack and Jill together were only “treading water” when it comes to debt, now that Jack and Jill have separated, they probably each feel like they are “drowning in debt.”
What should Jack and Jill do? Well, first, having a lot of debt makes any divorce messy, and going further into debt paying attorneys to split up Jack and Jill’s existing debt doesn’t make a lot of sense. What Jack needs to realize is that even if the Court orders Jill to pay their Visa bill, the credit card company can come back and sue Jack if Jill doesn’t pay. The credit card companies will say their contract is with Jack and that the divorce orders don’t affect a thing.


If Jack’s divorce attorney looks at his Sworn Financial Statement and realizes Jack needs a bankruptcy, Jack’s attorney should refer him and Jill to see a bankruptcy attorney together. That way, Jack and Jill can file bankruptcy together while they are still married and will have little to no debt to deal with in a divorce. If they make below the median income level in Colorado for their family size, they can file a Chapter 7 which is a total liquidation bankruptcy. All of their personal property is evaluated by the bankruptcy court, they get certain standard exemptions so that they can maintain a normal standard of living, and anything not exempted is surrendered to the bankruptcy court’s trustee who sells it and distributes the proceeds to Jack and Jill’s creditors. After their non-exempt property is sold, Jack and Jill’s debt is totally forgiven. The only catch is that Jack and Jill can only file bankruptcy once every eight years if they are eligible for Chapter 7, so they have to be more responsible going forward. Filing bankruptcy will make Jack and Jill’s divorce less messy, and make things much easier financially so that Jack and Jill can really start over.

If you’re going through a divorce and think you might need a bankruptcy, make sure to talk to your family law attorney about it. It might be the easiest way to really have a fresh start.