Divorce and bankruptcy commonly go hand in hand. Many people wonder if
one should be done before the other. While divorce is a common reason
why people file bankruptcy, there are a few areas to review that may help
you determine which one to do first and how to do it efficiently to help
ease each process.
For the most part, understanding which option to do first may depend on
where you live, how much debt and property you have, and which bankruptcy
chapter you want to file.
What to consider when determining your next course
of action:
- Filing bankruptcy before the divorce may help in dealing with dividing
property and debt between you and your spouse. - It may be less expensive for you and your spouse to file a joint bankruptcy
petition. This is an option to explore with your bankruptcy attorney,
yet you may want to make your attorney aware of your upcoming divorce
(conflict of interest could be an issue in representing both spouses).
This may also help reduce the cost of the divorce. - Review differences in each bankruptcy chapter.
Chapter 7 bankruptcy discharges qualifying debts such as
medical debt, credit card debt, and other unsecured debts.
Chapter 13 bankruptcy is a 3 to 5 year court-approved repayment plan based on income. If Chapter
13 is an option you may want to file divorce before starting your repayment
plan due to the length of the scheduled payments you will make. - Review with a bankruptcy expert about exemptions available for property
you and your spouse have. It may be better to file individually to obtain
more protection, but this may vary depending on the state you live in. - Review debts incurred by you and your spouse. It may make financial sense
to wipe out eligible debt in bankruptcy before filing divorce.
Reference:
https://www.nolo.com/legal-encyclopedia/divorce-bankruptcy-which-comes-first.html