Florida residents who file for bankruptcy should be sure to do some research and planning before filing, especially if they are doing so during or after a divorce. It is not uncommon for married couples to have both names on the titles of homes or automobiles that they own, and this can complicate the filing process. While filing for Chapter 7 bankruptcy can eliminate most or all of someone’s debt, if people are not careful, they could end up being liable for debt discharged during the bankruptcy.
When an individual gets a divorce, they may sign away interest in a particular asset. This means that they no longer are able to claim ownership of the item in question, but it does not keep them from being responsible for debt associated with it if their name is on the loan. If someone files for bankruptcy, this will discharge the debt, but it will not remove their name from an auto loan or mortgage.
A lender may attempt to get someone who has filed for bankruptcy to sign a reaffirmation agreement. This may be a bad idea because it could make someone liable for the debt again. If an individual has already relinquished interest in the item in question, it may not make little sense to put themselves on the hook for a loan again. Even if someone does not sign the reaffirmation agreement, as long their ex-spouse keeps payments to the loan current, a lender cannot repossess a home or automobile.
To ensure that filing for bankruptcy is as beneficial to an individual as possible, they need to understand what is involved before filing. A lawyer may be able to assist someone throughout the filing process.
Source: Fox Business, “How Does Divorce Affect Bankruptcy and Mortgage?”, Justin Harelik, July 03, 2013