Wednesday, July 8, 2020

Should You File for Bankruptcy Before or After Divorce?

Financial stress is one of the most commonly cited catalysts for divorce. Because of this, there are likely plenty of couples out there that are both simultaneously considering divorce and bankruptcy. If you find yourself in this position, you may be wondering whether it is best to file for bankruptcy before or after divorce. Here, we discuss things to be aware of when making this decision.

Should You File for Bankruptcy Before or After Divorce?

If you are considering or intending to file for both bankruptcy and divorce, proper planning can make both of these legal matters simpler and more cost-effective. Approach the decision of how and when to file for both bankruptcy and divorce with great care. In many, if not most, cases, filing for bankruptcy before you file for divorce is the best way to go. Filing for divorce and then filing for bankruptcy will result in divorce proceedings being stopped until the bankruptcy is completed. In some situations, however, it may be in the best interest of one spouse to file bankruptcy prior to or during divorce.

To initiate bankruptcy proceedings, an individual, couple, or business entity files official paperwork with the bankruptcy court. For married couples jointly filing, a joint petition will be filed which contains the necessary financial information for both spouses. Filing together can be much more efficient. With bankruptcy resulting in the discharge of qualifying debts for both spouses, things are made simpler for divorce proceedings. Debt and property issues to be addressed in divorce court will likely be reduced. Simplified divorce issues not only increases efficiency but reduces costs.

Additionally, filing jointly for bankruptcy is less costly than filing separately. The filing fees are the same for joint filings as well as individual bankruptcy filings. Filing jointly as opposed to two separate filings, as a result, means that you can save on legal fees.

It should be noted that married couples are not required to file jointly for bankruptcy. You have the option to file separately when you are married, during divorce proceedings, and after a divorce has been finalized. While it is most often beneficial for a couple to file for bankruptcy prior to divorce, there may be circumstances where one spouse needs immediate bankruptcy protection and filing as an individual makes the most sense.

Another consideration is that each spouse may have an easier time qualifying for Chapter 7 bankruptcy after divorce. The central qualification for Chapter 7 bankruptcy is income level. After a divorce, most couples will experience a reduction in income and, in particular, disposable income. This means that, while spouses may not qualify for Chapter 7 bankruptcy while still married, they may be qualified after divorce.

Miami Valley Bankruptcy Attorneys

If you are considering both bankruptcy and divorce, you are likely to be overwhelmed by all of the legal, personal, and financial issues you have on your plate. The dedicated team of knowledgeable attorneys at Miami Valley Bankruptcy is here to help ease some of these burdens. Contact us today.

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