How Bankruptcy Affects Divorce Settlements and Debt Division
Dec. 4, 2025
Divorce settlements already involve a range of financial and emotional concerns. When one or both parties have accumulated debt, filing for bankruptcy can significantly affect how debts are divided.
At Steven C. Frazier, Attorney At Law, based in Kingsport, Tennessee, I strive to help individuals throughout Northeastern Tennessee understand the implications of both divorce and bankruptcy.
With extensive experience in both areas of law, I can guide you through the process of debt division to help you understand how filing for bankruptcy may impact the division of assets and liabilities during your divorce.
How Bankruptcy Impacts Debt Division in Divorce
Filing for bankruptcy before or during a divorce can significantly affect how debts are divided between spouses. The primary aim of bankruptcy is to eliminate or restructure a person’s debts, and this can affect not only the party filing but also the spouse in the divorce proceedings.
Bankruptcy can discharge certain debts and reassign others, which influences the financial decisions made during divorce settlements. There are two main types of bankruptcy that can affect divorce settlements:
Chapter 7 bankruptcy: This type of bankruptcy involves liquidating assets to pay off debts. If one spouse files for Chapter 7, the debts that are discharged may no longer be part of the divorce settlement. However, any debts that are not discharged, such as spousal or child support, may still be considered during the divorce process.
Chapter 13 bankruptcy: Unlike Chapter 7, Chapter 13 involves reorganizing and repaying debts over time. When a spouse files for Chapter 13, the court will create a repayment plan. During a divorce, this plan can influence how debt is divided, and it may allow the spouse filing for bankruptcy to discharge some debts while retaining others for repayment.
Understanding how bankruptcy affects debt division can help you prepare for the negotiations that are part of the divorce process.
Impact of Bankruptcy on Property Division
When bankruptcy is filed before or during a divorce, it can affect how property is divided between spouses. Property that is considered “non-exempt” under bankruptcy law may be liquidated to repay debts, which can result in fewer assets to divide during a divorce. However, some assets are protected from liquidation, such as retirement accounts or personal property within certain value limits.
The division of property in a divorce is generally determined based on the state’s laws, and whether the bankruptcy is filed before or during the divorce can influence what property is available for division. If a spouse has filed for bankruptcy, certain assets might be protected under the bankruptcy filing.
In this case, both spouses may have to make compromises when dividing the remaining property. It’s important to consider the following when bankruptcy and divorce intersect:
Non-exempt property: Property that isn’t protected under bankruptcy law can be liquidated to pay off debts. This could include second homes, luxury items, or other valuable assets.
Exempt property: This may include personal items, a portion of retirement savings, or other assets that are protected by bankruptcy law. These may still be divided between the spouses, but the bankruptcy filing won’t impact these specific assets.
Debt relief: If a spouse has eliminated debt through bankruptcy, they may have more assets to divide, but their ex-spouse may not receive the full value of the property if it was affected by the bankruptcy.
The Timing of Bankruptcy Filing and Divorce
When you file for bankruptcy can have a significant impact on how your debts and assets are divided in a divorce. Filing for bankruptcy before or after the divorce can influence what debts are considered marital debts and how they will be handled in the divorce settlement.
Filing before divorce: If a spouse files for bankruptcy before the divorce, specific debts may be discharged. This could leave fewer debts to be divided in the divorce, potentially simplifying the process. However, any debts that are not discharged, such as child or spousal support, will still be considered in the divorce settlement.
Filing after divorce: If bankruptcy is filed after the divorce, it can complicate the settlement process, especially if joint debts are involved. The bankruptcy filing can change how debts are divided and may require both parties to revisit the terms of the divorce settlement.
The timing of bankruptcy and divorce filing should be discussed with an experienced attorney to understand how it will affect the overall settlement process.
Bankruptcy and Spousal and Child Support Obligations
Bankruptcy can also impact spousal and child support obligations during a divorce. While bankruptcy can discharge certain types of debt, it does not typically eliminate obligations for spousal or child support. The court will generally treat these as separate from the bankruptcy and include them in the divorce settlement, regardless of whether bankruptcy has been filed.
Child support: Bankruptcy does not discharge child support obligations. Even if a spouse files for bankruptcy, they must still meet their court-ordered child support obligations.
Spousal support: In most cases, bankruptcy won’t eliminate spousal support obligations. If a divorce settlement includes spousal support, the bankruptcy won’t change the amount owed, and the spouse filing for bankruptcy will still be responsible for making payments.
Debt discharged during bankruptcy: If debt is discharged during bankruptcy, the spouse may still be required to pay child or spousal support, as these are considered priority debts that can’t be eliminated.
Bankruptcy may provide relief from some debts accumulated during the marriage. However, support obligations will typically remain unaffected. To learn more, contact an experienced family law attorney today.
How a Divorce Lawyer Can Help With Bankruptcy and Debt Division
If you have filed for bankruptcy before or during a divorce, a qualified attorney can help you understand the legal implications and options available to you. Some common ways a divorce and bankruptcy lawyer can help include:
Understanding your rights: A lawyer can explain how bankruptcy law intersects with divorce law and how your bankruptcy filing may impact your divorce settlement.
Protecting your assets: An attorney can help protect exempt property and make sure that you are not unfairly deprived of your rightful share of marital assets.
Negotiating debt division: A lawyer can help negotiate how joint debts will be handled during the divorce and make sure that debt obligations are divided fairly.
Advising on support obligations: A lawyer can help clarify how bankruptcy will impact any support obligations, such as child support or spousal maintenance, to make sure you are not held to unrealistic expectations.
An experienced attorney can help you protect your interests while you work through the complications of both divorce and bankruptcy.
Reach Out to an Experienced Bankruptcy and Family Law Attorney in Tennessee Today
Bankruptcy can significantly complicate a divorce, but with the right guidance, you can manage both processes effectively. At Steven C. Frazier, Attorney At Law, I am committed to helping you understand the implications of filing for divorce before or during a divorce and find solutions that best protect your future.
Located in Kingsport, Tennessee, my firm serves clients throughout Church Hill, Johnson City, Bristol, and the surrounding areas of Northeastern Tennessee. Contact me today to schedule an initial consultation.