Interesting combinations can happen when bankruptcy is paired with divorce. Whether it features a recent divorce, a current and ongoing divorce process, or even when one is in the near future we can help in all kinds of situations. Bankruptcy and my divorce is something that should be timed and planned if at all possible. First you have to understand that these are two distinct legal actions (bankruptcy and divorce) and will not take place simultaneously in the same courtroom. Bankruptcy is part of the Federal Court System and divorce is part of a State Court System. You need to understand and your marriage status (including expenses and income) can greatly impact the type and outcome of filing for bankruptcy.
If you are contemplating filing for bankruptcy and divorce, then timing can be critical. Your bankruptcy attorney and your divorce attorney should be working together on your behalf if you try and do them at the same time. A common question is: Does it makes sense to file for bankruptcy before or after a divorce?
How Can Bankruptcy and Divorce Affect Each Other?
In general, bankruptcy takes precedence over your divorce. Filing for bankruptcy during a divorce can delay the distribution of assets and liabilities until the bankruptcy is completed. In other words, you have to finish your bankruptcy before a divorce can be finished. As a result, there is usually no real way to do the property division during a bankruptcy. Also, bankruptcy handles debts tied to a person and it can affect how debts are treated in your divorce. Finally, bankruptcy courts treat your income differently depending on whether you are married, separated, or divorced when the case is filed.
Why File for Bankruptcy First?
If you and your spouse are on good terms, then consider a bankruptcy before the divorce. By filing a bankruptcy jointly the marital debts will be addressed under one bankruptcy case. You will also wipe out your joint debts together and may also be able to increase your property exemption amounts. Bankruptcy may also eliminate contracts that neither one of you wants, like car leases that cost too much or mortgages on houses that are completely underwater. It also may make the divorce action go more smoothly since there is very little in debt to be argued about. For example if you qualify for a Chapter 7 bankruptcy you should be finish in about 90 days.
Why File for Divorce First?
Filing for divorce first might be a good idea if your joint income disqualifies you for Chapter 7 bankruptcy. In some cases, both spouses may qualify for Chapter 7 bankruptcy individually after a divorce even if they could not do it jointly.
Proper planning in a divorce may protect certain assets outside from the bankruptcy process. Working with an experienced bankruptcy lawyer can be useful to maximize your benefit from filing for bankruptcy.
Also by divorcing first, it will allow for support considerations. For example, if you will owe a lot of child or spousal support it will help to know that actual amount before bankruptcy. Sometimes the child support can affect how your bankruptcy will proceed. So do yourself a favor get an experienced attorney to help you with your bankruptcy if divorce is on the horizon.