Timing Is Everything With A Bankruptcy During Divorce
Both bankruptcy and divorce are stressful events but we can help you understand the process and successfully get you through it. Divorce is tough to go through and having to contend with a divorce and a bankruptcy at the same time can seem downright impossible. We’re here to help.
However, there is a strong correlation between divorce and bankruptcy, with bankruptcy often leading to divorce and divorce being one of the leading causes of bankruptcy.
As U.S. News & World Report points out, a divorce can be devastating for one’s finances, which can often require one party to file for bankruptcy. For those who are dealing with bankruptcy and divorce at the same time, it is important to understand how timing and the order of filing can dramatically affect the outcome.
Bankruptcy or divorce first?
Choosing between filing for divorce or bankruptcy first is a decision that will have to be made early on. There are advantages and disadvantages to filing either one first and the best course of action will depend on one’s particular situation.
As Divorce Magazine notes, one of the upsides of filing for bankruptcy first is that it may mean that filing and legal fees can be split between both spouses.
In some instances, it could also protect one party from paying certain joint debts. However, because this will entail the splitting of costs, filing for bankruptcy first usually requires both parties to be on very amicable terms. Also, because bankruptcy freezes assets and property, it can make dividing assets during a divorce difficult.
If filing for bankruptcy first it is usually advisable to file for Chapter 7 bankruptcy rather than Chapter 13. That’s because Chapter 7 bankruptcy eliminates all dischargeable debt usually within three to six months, whereas Chapter 13 can take three to five years.
By eliminating debt faster, one can get through the divorce faster as well. Although it is important to remember that not all debts will be discharged in bankruptcy, including student loans, spousal maintenance, and child support.
One thing that should be avoided when deciding whether to file for bankruptcy or divorce first is to avoid overlap between the two. As mentioned above, property is frozen during bankruptcy, which makes it hard if not impossible for a court to divide up the marital property.
That means the divorce could take longer than would be the case if the bankruptcy had already been finalized, which in turn could mean that the divorce itself could cost more.
Talk to an attorney
It is important to remember that when it comes to bankruptcy every case is unique. Anybody who is considering bankruptcy, especially if they are considering divorce at the same time, should talk to a bankruptcy attorney as soon as possible.
An experienced attorney will analyze the client’s situation in order to help them determine the best course of action, including when to file for bankruptcy or divorce.