June 23, 2016
Filing for divorce is never an easy decision; couple that with financial trouble and the circumstances can become even more daunting. It can be confusing deciding between filing for bankruptcy before or after your divorce. Below are some key factors to keep in mind when considering the right time for you to file for bankruptcy.
Cost of filing:
A couple that is married, regardless of residing in the same household or not, is able to file for a joint bankruptcy. Once a divorce is final, however, joint filing is no longer an option. Joint bankruptcy allows you the option to have all spousal debt addressed within one bankruptcy case. A joint case also reduces filing costs, attorney fees, and in many instances court fees that would otherwise occur in two separate cases. Keep in mind filing for bankruptcy while in the middle of divorce will not discharge any child support or alimony amounts set beforehand by the divorce court. Although filing a joint case can save you money, you are never able to coerce someone into filing for bankruptcy who does not wish to. Both parties must be able to cooperate with each other during the bankruptcy process therefore waiting until your divorce is final and filing two separate cases maybe your best option.
Division of Property
While eliminating your debts together in a joint bankruptcy before divorce will make the property division process after your bankruptcy much easier, there are still a few things to keep in mind. If there is conflict in this area separate bankruptcies may be required. You will also need to understand what exemptions you qualify for both jointly and separately. In some cases filing a joint bankruptcy may allow both parties greater exemptions. This is significant if you have jointly owned property such as a house or vehicle. In order to understand fully what exemptions you qualify for and if joint or separate bankruptcy works best in your current situation contact an attorney at Keller and Almassian.
Chapter 7 vs. Chapter 13
Another factor to consider is the type of bankruptcy you are looking to file. Household income plays a major role when qualifying for bankruptcy. If you qualify together for a Chapter 7 bankruptcy you can obtain a discharge within just a few months after filing clearing your joint debt prior to your divorce, thus allowing both parties a fresh start. If your joint household income is too high to qualify for a Chapter 7 bankruptcy a Chapter 13 bankruptcy may be your best option. Recognize Chapter 13 bankruptcies do last longer than Chapter 7 bankruptcies roughly five years. In joint Chapter 13 bankruptcy cases both parties will continue to be responsible for making payments to their creditors on the payment plan previously set up even after the divorce is final. It is however; extremely difficult to have a bankruptcy repayment plan set up based on joint income that you no longer have access to once your divorce is final. When considering divorce during your bankruptcy it is extremely important to be up front and honest with your bankruptcy attorney ahead of time in order to reduce any complications with your bankruptcy case.
Although a divorce is sometimes unavoidable during a bankruptcy, it can be more challenging. Once you file for bankruptcy Automatic Stay will place a hold on all of your property hindering you from dividing your assets until your bankruptcy is over. Due to Automatic Stay your pending divorce can be brought to a standstill until your assets are cleared by the bankruptcy judge.
If one spouse has previously filed for bankruptcy they may not be able to file another joint bankruptcy case at the moment. Courts have made it difficult to file too many bankruptcies within a short period of time. This does not mean that bankruptcy is off the table; however you will need to consult an attorney to look over your previous discharge and verify eligibility.
There are many factors when considering bankruptcy and divorce. To put your mind at ease, gain a better understanding on the filing process, and navigate the differences between joint and separate bankruptcy cases contact an expert bankruptcy attorney at Keller and Almassian.