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.