Divorce takes its toll. It can affect you emotionally and physically in ways that you might not have thought possible. However, it could also affect you financially, especially when you are considering bankruptcy at the same time. This just ends up adding more stress and problems. In some cases, there isn’t a choice. Below, we will be looking at some of the most important things you will need to know when it comes to divorce and bankruptcy.
It’s a Bad Idea to File for Divorce and Bankruptcy at the Same Time
While you might just want to get everything over and done with all at once, it’s not feasible. Having two legal matters happening at the same time is never ideal, and it can lead to massive amounts of stress, as well as confusion. Most of the time, people will file for bankruptcy before they get a divorce. There are some advantages to this, which are discussed later.
When you file for bankruptcy, whether it is Chapter 7 or Chapter 13, an automatic stay is applied. This means that the creditors will not be able to contact you, and it will put a freeze on your property and your assets. The bankruptcy court does this to determine the debts you owe and the assets you have. The hold is going to stay in place for the entirety of the bankruptcy process.
If your divorce and your bankruptcy were to overlap, the automatic stay would mean that it is essentially impossible to split up your assets and handle certain other parts of your divorce. This means that the divorce could end up lasting for far longer than it should. You will end up dealing with added stress and emotional turmoil. A longer divorce also means added expenses.
All Situations Are Unique
While you shouldn’t go through divorce and bankruptcy at the same time, whether you should file before or after getting a divorce can vary. The choice is yours, but you will find that certain factors can give you an idea of when you should file.
For example, if you and your spouse are still on relatively good terms when you are considering a divorce, you might want to go through bankruptcy first. When you file first, you are able to share the cost of the attorney and the filing fees. Additionally, it might also help you from paying a joint debt.
If you and your spouse have incomes that put you over the threshold for filing for Chapter 7, though, it might be more advantageous to wait until after the divorce to file. Your income will be lower at that point.
Before you decide whether you should file for bankruptcy before or after getting a divorce, it’s a good idea to consult with a bankruptcy attorney. They can look at your case and determine which course of action will be best for you.
Chapter 7 Is Usually Better for a Divorce When You File for Bankruptcy First
If you are going to file for bankruptcy before getting a divorce, you will find that Chapter 7 is the route to go, if possible. This is because it is a relatively quick process. Most of the time, all of the dischargeable debt will be gone within three to six months, which is the usual length of time for bankruptcy.
However, if you were to file Chapter 13 instead, you could be on a payment plan for three to five years rather than eliminating your debt. There is the potential that this could drag out your divorce for longer. If you have already filed for Chapter 13 with your spouse, there is the option of restructuring or canceling the plan if you choose. Again, for something like this, it’s a good idea to speak to a bankruptcy attorney to see which is better for you.
Keep in Mind that some Debts Aren’t Included
Here is something a lot of people do not realize. Not all of your debts will be canceled because you file for bankruptcy with Chapter 7. Certain non-dischargeable debts will still need to be repaid according to the law.
These include child support, alimony, fines owed to the government, student loans, court fees, and attorney fees for child support or custody cases.
Sometimes, the bankruptcy court might deem that some other types of debts can’t be discharged, as well. If the debtor doesn’t do certain things, they could be denied a Chapter 7 discharge. Some of the things that could cause the bankruptcy to be denied include not providing tax documents, hiding property to defraud creditors, destroying financial records, committing perjury in the bankruptcy case, and violating a court order.
It’s a Fresh Start—Do It Right
Getting a divorce gives you a fresh start, and so does filing for bankruptcy. If you and your spouse are in financial trouble, as is often the case with divorcing couples, you may want to take about the advantages of filing for bankruptcy now. Get it out of the way and then move on with the divorce. It tends to be the best solution for those who are facing both of these legal issues.
When you are going through divorce and bankruptcy, you will want to make sure you have a great attorney who can help you understand your case and everything you need to do. These sorts of cases can be complex, and it’s easy to make some mistakes if you aren’t careful.
Although you might be able to go through your divorce without an attorney, that might not always be true. If you believe your divorce will be contentious or anything but smooth and uncontested, it’s a good idea to get in touch with a family lawyer. Just like bankruptcy, these sorts of cases can be difficult. It is generally a good idea to consult a lawyer that can help you through the process, so you can reach an outcome that you find favorable.