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What is a "chain bankruptcy"?

A "chain bankruptcy" happens in divorce when the bankruptcy of one former spouses forces the other into bankruptcy. For example, one spouse files for bankruptcy, and because of it, debts he or she agreed to pay as part of the settlement go to his or her former spouse. Faced with these debts, the former spouse fails financially, which forces him or her into bankruptcy, too.

Now, with the change in the law in 1994, this outcome is much less likely to occur. A spouse should be aware, however, that there is still a possibility that a chain bankruptcy may occur.