Divorce can be one of the most stressful events in a person’s life. And then, their world may become heavier when they realize they are being burdened by financial hardships too. Divorce is actually one of the contributing factors of someone encountering financial distress. So, it is smart to think about what your bankruptcy options are and whether you should file before or after your divorce has been finalized. Here we have taken a look at elements to consider with your bankruptcy lawyer when figuring out the best time to submit your bankruptcy paperwork:
What Bankruptcy Chapter To File For
There are many different bankruptcy chapters to consider. Aside from when to file, it is important to decide what bankruptcy chapter is most suitable to apply for. Depending on what chapter is appropriate, your lawyer may advise filing before or after the divorce. For instance, if you choose Chapter 7 bankruptcy, then it may be in your best interest to file before the divorce. Chapter 7 bankruptcy can be submitted and completed within a few months, and there isn’t any rule against you and your spouse filing jointly, discharging debts, and then getting a divorce after.
But then, let’s say you file for Chapter 13 instead. This process can last upwards of 3-5 years, so it may not be in your best interest to file before getting divorced. If you want to divorce within this time frame and file for bankruptcy, matters can get complicated very quickly. Your lawyer can advise how to approach this predicament.
Filing for Bankruptcy Jointly
If your spouse wants to file joint bankruptcy, then you can save money on fees and other associated costs. Filing beforehand can simplify problems regarding property division and debts, making the divorce process easier and less costly for you both. However, before making the choice to file jointly, you have to ensure that the state you live in gives you sufficient exemptions to protect property between you and your husband or wife. For example, if you own a significant amount of property, then it may be better to file jointly but only if you can double the exemptions.
But, if you aren’t permitted to double your exemptions and have more property than can be exempted in joint bankruptcy, then it may prove useful to file independently after the property has been divided in the divorce settlement. It is worth noting that if you file for bankruptcy while a divorce process is currently proceeding, then an automatic stay will place a hold on property division until bankruptcy has completed.
Insight on Discharging Marital Debts
A time-consuming and expensive step in the divorce process includes litigation over what debts should be assigned to which spouse. Furthermore, requiring one spouse to pay a certain amount towards debts in the divorce settlement doesn’t mean that the other spouse has no obligations towards that creditor. It may ultimately be in the best interest of both spouses to file for bankruptcy and eradicate combined debts prior to divorce.