Divorce or Bankruptcy – Which one should get your attention first?

Divorce and bankruptcy, neither decision is easy to make. Both divorce and bankruptcy may change your personal and financial life in a big way. If you’re planning to file bankruptcy and divorce at the same time, then it can be a bit tough for you to decide. Most people feel confused about whether they should file bankruptcy before or after getting divorced. Well, you must take the decision after considering all the financial obligations that you and your spouse have.

Do divorce and bankruptcy really affect each other?

Divorce and bankruptcy affect each other and that’s why it’s better to contemplate before filing both at the same time. Filing bankruptcy during the divorce process will only delay the procedure. All the assets and liabilities won’t be distributed until the bankruptcy is resolved. As experienced lawyers say that bankruptcy should be finished before proceeding with divorce. When it comes to managing debts and other financial obligations in bankruptcy, the debtor’s name and the social security number are considered first. Bankruptcy court also considers marital status before treating individual income. So, you can understand filing bankruptcy separately and as a couple are not the same. Bankruptcy affects the asset distribution during divorce.

Divorce and bankruptcy – Which one you should file first?

There is no doubt that bankruptcy and divorce shouldn’t be filed at the same. So, the question arrives which one you should opt for first. Whether it should be bankruptcy or divorce? Well, to know the answer you’ll have to know the legal consequences first. So, have a look at the section below for the details:

  • When you file bankruptcy first: When you’ll opt for the court monitored process to manage financial obligations as a couple, all the due debts will be addressed under the same case. You’ll be able to eliminate your joint debts. There is also a possibility to increase the exemption amount. If one spouse earns enough, then filing as a couple will increase the chance to qualify for Chapter 7 bankruptcy as well. Remember, if you file for Chapter 13, then both of you will be responsible to continue the repayment plan. You won’t be able to segregate your assets by sale.

  • When divorce should be filed before bankruptcy: If Chapter 7 is your option and your joint income is too high to be qualified, then it makes sense to get divorced first. It has happened many times that both the spouses got qualified for Chapter 7 after divorce as their individual income isn’t that much high. You must also know that with proper planning during divorce you can easily move some of your assets outside the influence of the bankruptcy trustee. Divorcing before bankruptcy also helps in support consideration. You’ll be able to know exactly how much you owe as support and this will somehow make the bankruptcy procedure faster.

  • The cost matters too: Filing bankruptcy as a couple is less costly in comparison to filing separately. To file for Chapter 7 you’ll have to pay a $306 fee and for Chapter 13 the fee is $281. There are additional charges for credit counseling and attorney’s fee as well. So, before you decide to file bankruptcy after divorce, make sure you can afford the charges.

So, you can understand, it’s better to evaluate the financial situation first and then opt for the right option. To get rid of your confusion you may consult an experienced Certified Divorce Financial Analyst.

 

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