Financial issues are the number one reason why couples file for divorce. If you are planning on divorcing your spouse and you are both drowning in debt, you may be planning on filing for bankruptcy. If you are, you may find yourself wondering if you should file for bankruptcy before you file for divorce or after you file for divorce. It is never recommended that you file for bankruptcy in the midst of a divorce, as the cases can become tangled, complicated and costly. Learning the pros and cons of filing bankruptcy before or after divorce will help you determine which is the better option for you and your soon-to-be-ex.
The Cons of Filing for Bankruptcy Before Divorcing
One of the biggest cons to filing for bankruptcy prior to divorcing is that you and your spouse both have to agree to hold off on filing for divorce until the bankruptcy is discharged. Most people file chapter 7 bankruptcy, which can take a few months to get discharged, depending on whether your credits dispute the filing or how backed up your local courts are. If you or your spouse are in a hurry to file for divorce, you may be better off holding off on filing bankruptcy.
If you agree to hold off on filing for divorce until the bankruptcy is discharged, you need to be aware that you can still be held liable for any new debt that your spouse accrues if you live in a community state during this time period. You cannot file for legal separation or do anything to protect yourself. If your spouse has a history of overspending, you may be better off filing for divorce and then filing for bankruptcy when the divorce is final.
The Pros of Filing for Bankruptcy Before Divorcing
One of the biggest benefits to filing for bankruptcy prior to divorcing is that it makes the division of debt and property easier in a divorce. There is no debt to argue and fight over. And all of your assets have already been listed in the bankruptcy filing, ensuring you don't have to go digging around to list everything again. Splitting up debt can lead to unnecessary litigation if both you and your spouse plan to file bankruptcy anyways, so wiping it out prevents that.
The other advantage to filing for bankruptcy before divorcing is that it costs the same amount to file a joint bankruptcy as it does an individual one. If you and your soon-to-be-ex both plan on filing, you can save money by filing together, helping you both to get a fresh start for your separate lives.
If you are not sure whether or not you should file bankruptcy before or after divorcing, speak to a bankruptcy attorney, like one from Tim George & Associates. They can help you determine what the best option is for you.
Share1 August 2017
Too many single people assume they don't need to plan their estate. My brother fell into this category, and his unexpected passing left our entire family struggling to deal with his home, belongings, and financial accounts. It took nearly three years for the courts to set up a deal because he left no paperwork detailing how he wanted his estate divided. The situation immediately convinced me to work on my own estate, even though I'm still in my early 30's and don't have children or a spouse to worry about. Since it's a little harder to pick beneficiaries and estate managers when you're single, I collected the resources I used for making my own decisions and decided to publish them here on my blog. Use these resources before talking to an estate planning attorney so you're prepared for making hard decisions.