When a couple divorces, the court issues a divorce decree that divides assets and debts between the spouses, but either spouse can file bankruptcy after the divorce. If your ex-spouse files bankruptcy rather than paying the debts assigned to him in the divorce, you may have to deal with creditors of joint debts on which you are still listed.
Creditors in Divorce
Your divorce decree’s terms control what you and your spouse do, but it doesn't control your creditors. If your divorce decree assigns a joint debt to your spouse for payment but he files for Chapter 7 bankruptcy, your creditors can pursue repayment from you instead, even if your divorce decree says otherwise. If your ex-spouse has debts that are only in his name (regardless of the divorce decree), creditors cannot collect that debt from you, though they may try to harass you into paying.
Chapter 7 Discharge
Your ex-spouse could file Chapter 7 bankruptcy, which can discharge your ex's liability on certain debts that remain unpaid. Some debts, like domestic support obligations, student loans and certain income taxes, aren't dischargeable in bankruptcy.
However, only your spouse is relieved of the obligation to pay these debts if she files bankruptcy; the bankruptcy discharge is personal to the one who filed. You will still be liable to pay even if your divorce decree says the debt belongs to your ex-spouse unless the creditor officially removed you as a co-debtor from its records.
Hold Harmless in Divorce
If your marital settlement agreement or divorce decree contains a “hold harmless” clause, the clause makes your ex-spouse responsible to pay your share of certain debts, even when your name is on the debt. In some ways, such a clause supersedes some bankruptcy and contract laws because it prevents the bankruptcy court in a Chapter 7 case from entirely erasing your ex-spouse’s responsibility to pay the debt.
The bankruptcy court can only discharge your ex-spouse's obligations to the creditor, not his obligation to you. You may initially have to pay the debt if your spouse fails to do so, but you can take him back to court to enforce the terms of your divorce, specifically the hold harmless clause. The court can order your ex-spouse to reimburse you for any payments you had to make on the joint debts.
Chapter 13 Bankruptcy
Your ability to enforce a hold harmless clause applies only to a Chapter 7 case. Chapter 13 bankruptcy, which involves a repayment plan over three to five years, can override hold harmless clauses because the court is able to eliminate your ex-spouse’s obligation to pay you back if the creditor comes after you to collect the debt. However, your ex-spouse’s Chapter 13 bankruptcy offers you the protection of an automatic stay of collection actions on joint debts that are consumer debts, so the creditors cannot come after either of you while the Chapter 13 case is pending. If the joint debt is a business debt, however, the spouse's bankruptcy will not protect you.
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