It may seem as if New York divorce and bankruptcy law are about two largely unrelated things. Sure, financial distress is often a predicator of marital dissolution. In addition, divorce does involve a divvying up of property and debts (as well as the matter of child custody, where applicable). However, if a bankruptcy and a divorce are pursued at the same time, it seems separate attorneys should do them in separate pieces.
However, bankruptcy and divorce in NY are often intermingled events for several reasons:
- While assessing the debts accumulated in the marriage, the couple or the court need to determine how to allocate the burden for paying off those debts – which may lead to one or both parties opting for bankruptcy protection.
- Sometimes, one or both spouses excessively use credit in the period immediately preceding the divorce, prompting unmanageable debt (which can be viewed negatively in both divorce and bankruptcy proceedings).
- A bankruptcy filing made while the divorce is in process can stall the divorce until all matters of marital property and debt are finalized.
On the plus side, if there are two properties in the marriage, the divorce agreement may allot one property to each divorcing spouse such that each property is subject to the homestead exemption – perhaps enabling one or both to avoid bankruptcy. Since January 2011 in New York, that exemption falls into the $75,000 – $150,000 range (the upper end in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam counties).
An attorney with experience in both divorce and bankruptcy can strategically consider all such factors to develop an optimal plan. Contact the Law Office of Gregory Messer in Brooklyn for more information.