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Which Comes First, Bankruptcy or Divorce?

Call Today 559.900.1263

Which Comes First, Bankruptcy or Divorce?

It’s no secret that countless marriages fall apart because of financial problems. Because of this, it’s not uncommon for a divorcing couple to be faced with the question, “Do we file bankruptcy before or after our divorce?” The answer depends on the couple’s individual situation, but in many circumstances, it makes sense to file bankruptcy then divorce. Read on to learn why this is.

It’s All About ‘Timing’

If you are considering filing for divorce and bankruptcy, the timing of your bankruptcy can be crucial. For starters, we want you to understand that as a general rule, bankruptcy cases take precedence over divorce cases.

If you file for divorce and then file bankruptcy while your divorce is pending, bankruptcy can delay the division of assets and debts because the bankruptcy has to be completed before this can be done in a divorce. In other words, it’s impossible for a couple to do them at the same time. What else you should know:

  • Since bankruptcy debts are tied to Social Security numbers, bankruptcy can affect how a couple’s debts are treated in their divorce.
  • Depending on a spouse’s marital status (single, married, separated, or divorced) when the bankruptcy is filed, the bankruptcy court will treat their income differently.

Why File Bankruptcy Before Divorce?

It doesn’t make sense 100% of the time to file bankruptcy before the divorce, but in the majority of the cases, it does. If you’re getting divorced and you get along with your spouse, it’s wise to consider filing for bankruptcy before the divorce.

When you file bankruptcy jointly, you only pay for one bankruptcy and all of the debts are addressed under one case. You may be able to increase your bankruptcy exemption amounts, and you may be able to wipe out your joint debts instead of one person discharging them, and the other spouse is on the “hook” for them.

If neither of you wants a contract, such as auto loans or a mortgage that’s underwater, bankruptcy may be able to eliminate those. If you and your spouse qualify for a Chapter 7, it should only take about 90 days to wrap up. In effect, you and your spouse may be able to eliminate thousands in unsecured debt so you can get a clean start after your divorce.

“Why file for divorce before bankruptcy?” If your joint income disqualifies you for a Chapter 7, you may qualify for a Chapter 7 individually after the divorce is final. So, you may not have a choice.

We are only scratching the surface on divorce and bankruptcy considerations. To learn more, reach out to Arnold Law Group, APC to meet with one of our Fresno bankruptcy attorneys.