Think long and hard before filing a Chapter 13 “adjustment of debts” case together with your spouse if your marriage won’t outlast it.
We’ve all heard that pressure from debts is the #1 reason for the breakup of marriages. From that it’s only sensible to think that relieving that pressure successfully through a bankruptcy can help a struggling marriage.
Practically speaking, this seems to make more sense with a Chapter 7 “straight bankruptcy,” which in most cases lasts less than four months. Its quick relief from financial pressure means quick relief for your marriage.
Chapter 13 is tougher choice, because it takes three to five years to complete. But it DOES provide some immediate relief in just about every case, and often a great deal of relief. Taking you off the pressure boiler may give you and your marriage some emotional normality, and the time and space to heal and improve.
But making the monthly Chapter 13 plan payments also takes consistency and some discipline. So it takes teamwork in the marriage to make Chapter 13 work. So the marriage needs to be at least strong enough for the two of you to be able to work as a team. You need to be able to trust each other enough, and believe in each other and, frankly, in the wisdom of the Chapter 13 process to commit to it together. And that trust and commitment has to last through the years that it takes to complete it successfully.
The Example
The following illustrates this.
Austin and Denise were married for ten years, with a seven year old daughter. Because of periods of unemployment for both of them during the last 5 years, they struggled to keep up with the payments on their home and two vehicles, as well as their other debts. They both recently started working at decent jobs that looked like they would last. But then they received notice that their home was being foreclosed. They were late on many of their debts, including both their vehicles.
Austin and Denise were living in financial fear and frustration. They had been emotionally on edge for the last five years because of their financial difficulties, and it showed in their relationship. They each started wondering whether their marriage was going to survive.
But they hated the idea of divorce and the intense pain it would cause them and their daughter. Denise and Austin both loved their home, and wished there was a way to save it. They absolutely needed their vehicles and desperately wanted to stop always being a step away from losing them. They wished they could get immediate and long-term relief from their debts, and find financial stability.
The two of them met with a competent bankruptcy attorney, who described how through Chapter 13 they would have three years to catch up on the many thousands of dollars they were behind on their first mortgage. They also received the great news that they could stop making payments on their second mortgage since their home was worth less than their first mortgage balance. They were also advised that because their vehicle loans were both more than 910 days (about two and a half years) old, these loans could be “crammed down,” meaning that current late payments would not need to be paid, and the future monthly payments would be significantly reduced. Finally, they learned that they would only need to pay their other creditors as much as their budget would realistically allow during the following three years.
With the huge immediate monthly savings, Austin and Denise saw that they would get tremendous immediate relief. And the many tens of thousands of dollars in long-term savings gave them realistic hope that they would finally be able to permanently tame their up-until-then seemingly impossible debt beast.
But their attorney also made very clear that they would not actually get the legal write-off of the second mortgage and of their unsecured creditors unless they made all the Chapter 13 plan payments and finished the case after three years. The attorney also talked about some of the complications that could arise if they would not be able to maintain their Chapter 13 plan payments and the case was dismissed (thrown out and closed).
So after getting back home Denise and Austin had a very candid conversation about their marriage. They talked about how it could be helped by this Chapter 13 opportunity, but also the problems that could arise with it if they got divorced midstream. After thinking and talking about it for a day or two, they decided to file a Chapter 13 case together. They committed to making it work, and while doing so they re-committed to their marriage.
Denise and Austin informed their attorney of their decision to file a Chapter 13 case, and their case was filed. They got the immediate relief they were told to expect, and their marriage breathed a sigh of relief. Their obligations immediately became realistic, so they were able to meet them. They had money in their budget for everything they needed. They saw themselves making steady progress. They worked together successfully as a team, renewing their respect and love for each other.
After three years, Austin and Denise became current on their home mortgage, paid off the loans on their vehicles so that they owed them free and clear, and wrote off all their other debts beyond what their budget had let them be paid. They were debt-free other than the current payments on their home, where they lived together in a rejuvenated marriage.