So you are getting a divorce here in New Jersey and are in financial difficulty. In fact, you are considering bankruptcy. But did you know that filing bankruptcy can have an effect on the equitable distribution of your property in your divorce?
This can happen if some of the property was purchased on a credit card offered by a particular store, like Best Buy, Sears, Raymour and Flanagan and the like.
Many people don't realize that when they apply for the credit card account that that have agreed to grant a lien (just like on a house or a car) to the bank on anything you purchase with it.
This might not make a difference to you, unless you are filing for bankruptcy; then it can make a big difference in whether you will be totally free of the debt.
So How Does This Affect My Divorce?
So what if a lot of the "stuff" being divvied up in your divorce was purchased on a card that is in one or both of your names? You may well be forced to sign a reaffirmation agreement that would exempt the debt from the bankruptcy discharge, require you to continue to make monthly payments, and preserve the lien on the property during that time (usually three years).
There are important issues to consider as to how significantly this could affect you, since the bank still has to prove the lien as well as the current value of the collateral. However, if the bank succeeds, and the debt is reaffirmed, issues can arise, including:
- You can't sell or give away the property without paying off the lien
- A "Buy-Out" of one spouse to the other for marital property must contemplate the lien balance
- Agreements for trade-offs of marital property (you get the furniture, I get the car) can be complicated if both spouses signed on the credit card account
So What Do I Do?
It is for these reasons that I recommend having a bankruptcy attorney work with your divorce attorney to address these issues. Agreements on equitable distribution have to address potential ongoing liability issues on marital debt.
If you live in southern New Jersey and are thinking about filing bankruptcy, please call me at 856-432-4113 or contact me through this site to schedule an appointment to discuss your case.
If you are looking for further information, then download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.