In the movies and on television, casual references to divorce and property division seem to promote the idea that divorcing spouses will automatically split their assets down the middle, with each person getting an equal share. While there may be some level of truth to that assumption in certain states, the reality in Illinois is often much more complex. Divorce and property division statutes in the state require the equitable distribution of marital assets, which means fair and just, not necessarily equal.

Negotiated Agreements

As with most aspects of divorce, there is no requirement that all decisions must be left up to the court. You and your spouse are able to work out a property division agreement that is reasonable and meets the needs of all involved parties. If the resulting agreement is not unconscionably one-sided and you and your spouse voluntarily agree to its terms, the court is very likely to approve it and incorporate it into your divorce settlement. Such an agreement, however, is not always possible; in which case, the court must intervene and make a determination.

If you or your spouse ends up in the unenviable position of having to file for both bankruptcy and divorce, it is imperative that you both understand the laws surrounding marital debts and bankruptcy. Many couples make assumptions and then react strongly when their carefully constructed asset division proposal collapses on itself. By educating yourself, you and your spouse can work to avoid such a fate.

Bankruptcy First?

One of the biggest questions regarding asset division, but especially marital debt, is whether to file for bankruptcy before divorce or vice versa. The general rule is that it depends on each spouse’s individual finances, and which type of bankruptcy would be filed. However, in most cases, filing beforehand tends to streamline the divorce process, while filing afterward or concurrently can cause a divorce to drag on. This is especially true if you or your spouse would be filing a Chapter 7 bankruptcy, either jointly or individually. In a Chapter 7, all debts are eliminated or written off, as opposed to in other types of bankruptcy where restructuring is more common.

Most people do not think about retirement benefits or accounts until they need to do so. Young people and couples may briefly mention such things in a prenuptial agreement or other type of discussion before or during their marriage, but too often, retirement is just something to think about in the future. The exception to that rule is during a divorce, as retirement savings and benefits are some of the most commonly disputed assets between spouses. It is extremely important that you understand what you are entitled to receive, if anything at all.

401(k) Accounts

If you have been at the same job for an extended period of time, there is a good chance you are enrolled in either a 401(k) account or an IRA (Individual Retirement Account). Such accounts are generally held to be marital assets (even if they only have one name on them) because, in most cases, they are either acquired or appreciate in value during the marriage. Dividing these accounts during a divorce can be somewhat complex because the rules differ significantly between states. 401(k)s, however, are governed by federal law—the Employee Retirement Income Security Act, or ERISA. Thus, the same procedure applies everywhere.