Should You File Bankruptcy Before or After Divorce?
Encinitas, CA – When you’re facing divorce, your emotions go through the ringer.
You can’t eat, you can’t sleep, and the last thing you want to think about is financial hardship.
The unfortunate fact is, bankruptcy and divorce often go hand in hand.
The question is: Should you file for bankruptcy before you get divorced or after?
While it’s always a good idea to seek the assistance of a qualified family attorney, the following will help you form a game plan so that this phase of your life passes as smoothly as possible.
Saving Money on Fees
Divorce can be expensive for both parties. So you should be looking to save money at every turn.
There is a silver lining as far as bankruptcy and divorce are concerned. There is absolutely no difference in bankruptcy filing fees whether you are filing alone or jointly.
That means that filing for bankruptcy as a couple can save you both on court costs.
You can also hire a single bankruptcy attorney as a couple instead of hiring one each on your own.
However, make sure you tell your bankruptcy attorney that a divorce is pending.
In some cases, the attorney you’re working with will see it as a conflict of interest to represent both of you as a couple if a split is indeed in the works.
Considering the Types of Bankruptcy
Before you file for bankruptcy, you should be aware that there are two primary types: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy where your debt will be liquidated. This type is designed to rid you of your unsecured debts as quickly as possible. Examples of unsecured debts include credit card balances and hospital bills.
This type is ideal for couples who are about to divorce, as the case will typically be discharged within a couple of months.
If you are looking to get the matter over with before your divorce is finalized, Chapter 7 is the bankruptcy type for you.
Although, Chapter 7 may not be an option for either of you if your household income is too high. If this is the case, it might pay to wait until the divorce is finalized before you file the bankruptcy paperwork.
Chapter 13 bankruptcy takes a tad longer; usually around 3 to 5 years. The reason for the lengthy term is because you will be required to make good on your debts through a pre-approved repayment plan.
If Chapter 13 is a consideration, you might want to file after the divorce has been finalized, as you will be paying off your debts for some time.
When You Co-Own Property
If you are both the owners of the same property, as in the property was acquired during your relationship or before the two of you were married, your state may allow you enough exemptions to protect that property, enabling you to file a joint bankruptcy agreement.
If your state does not allow such exemptions, you might want to file jointly after the divorce, and after the property has been divided between the two of you as part of the divorce agreement.
Be mindful of the fact that the judge who presides over your divorce may place a hold on the property, preventing it from being divided until the bankruptcy is completed. Ask your divorce attorney for guidance if property ownership is an issue.
Are You Both in Debt?
Debt is one area that can get incredibly complicated during a divorce proceeding. Just because one spouse has been ordered to pay a debt, for example, doesn’t alleviate the other spouse from their obligation.
For instance, if your ex-wife has been ordered to pay the debt on a joint credit card the two of you owned and she doesn’t pay, the creditor can still come after you for the balance owed. This is true even if she files for bankruptcy individually.
You can pursue your spouse for not paying their portion of the debt, but you’re only looking at more time and greater expense.
It might be best to file bankruptcy so that the debt can be taken care of before you file for divorce.
Are You and Your Spouse Amicable?
If you and your spouse agree on everything and get along fine, it may be a good idea to file for bankruptcy before you initiate the divorce.
Otherwise, you might only be adding to your stress as the two of you split.
Consider that you will be relying on your spouse to show up to court and to provide all the financial documents the judge may ask for.
You’ll also want to be sure that your spouse will work with you and your divorce attorney to hash out the details.
The State You Reside In
To make the process of divorce and bankruptcy as easy as possible, you should check the laws in your state. A qualified family attorney can help you navigate this often complicated process, making matters easier on all involved, including any children the two of you may share.
To find out whether you should file for bankruptcy before or after divorce so that you can put these matters behind you and start the next chapter of your life, call the attorneys at Griffith, Young & Lass for a free consultation at 858-345-1720.
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