Divorce and bankruptcy are two of the most emotional legal processes that any individual can go through, and as a result, it is a good idea to pursue them one at a time if at all possible. Though it is understandable to want to escape or end a bad marriage quickly, doing so can complicate a bankruptcy proceeding, and potentially make it much harder for the divorce proceedings to move forward quickly. There are several reasons for this:

  • One of the first things to happen when you file for bankruptcy is that an automatic stay is placed on all of your debts and puts a freeze on all of your assets. The stay is effective through the entirety of the process, and though that’s great if you’re getting constant calls from debt collectors, it makes the equitable division of property in divorce nearly impossible. If possible, complete the bankruptcy process before the divorce.
  • Filing for bankruptcy prior to your divorce will allow you to split the cost of a bankruptcy attorney and all related costs. Additionally, it will eliminate debt for both of you instead of leaving one of you with debt on property listed in both of your names.
  • Depending on where you live, if you are married and file for bankruptcy together it will double the value of your home exemption, thus making it more likely that you can hold on to your house.
  • If you are planning on divorcing after bankruptcy, then Chapter 7 will probably be the best route for you to go. This is because the Chapter 7 process is much faster. Where Chapter 7 bankruptcy generally resolves within a matter of months, a Chapter 13 bankruptcy is not completed until the payment plan has eliminated all debt, which generally takes years.
  • Bankruptcy does not address all debts and specifically does not eliminate alimony or child support payments.

Though these are important considerations, you should also keep in mind that calculating eligibility for a Chapter 7 bankruptcy will be based on your joint incomes. If your combined income puts you over the threshold, then completing the divorce process first may make more sense.

There’s an old saying about money being the root of all evil, and it is definitely the source of many marital problems. If you are considering a divorce because of money arguments, you may want to reconsider whether eliminating your debt would also eliminate your problem. If not, be advised that once you decide to divorce you and your spouse should probably each have your own bankruptcy attorney to represent your best interests. For more guidance, contact our experienced attorneys today.

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