Bankruptcy and Divorce

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One of the most common factors in divorce is financial problems.  Arguing about money with a spouse is one of the most destructive and painful aspects of any relationship.  When the financial situation is quickly deteriorating, it’s unfortunately not uncommon for the marriage to fall apart at the same time.

If you’re heading towards divorce in the midst of a personal financial meltdown, is it better to file for bankruptcy before or after the divorce? There are many factors to consider.

Before Divorce

One of the compelling arguments for filing beforehand is the clean slate bankruptcy can provide.  By having all of your financial issues settled and all debts handled one way or another, the process of dividing property and working out support is much easier.  Thus, it can often be advantageous to file for bankruptcy before you file for divorce.

At the same time, by filing for bankruptcy while still married, you can file once and save a second filing fee.  Plus, bankruptcy puts a hold on property division as ordered by a court, but not on support decrees, so filing for bankruptcy simultaneously with divorce can be very messy and chaotic, and extend the process for a longer period of time.

After Divorce

Waiting until after a divorce is granted to file bankruptcy has its own advantages.  If your combined income as a couple is too high, you may not qualify for bankruptcy, but after splitting incomes you may find it a viable alternative.

A Chapter 13 bankruptcy may not be possible if you plan to divorce, as the arrangements likely cannot be maintained after a divorce.  As a result, divorcing first and then filing for Chapter 13 is really the only workable strategy if Chapter 13 is the structuring you want.

In the end, you should consult with a qualified bankruptcy attorney before making any decisions.  Laws vary from area to area and your own specific circumstances will have an impact on the best approach to bankruptcy for you.

How does filing for bankruptcy during divorce proceedings affect support payments and property division?

Divorce and Bankruptcy: Should I File For Both at the Same Time?

It’s no secret that money problems are one of the leading causes of divorce.  In fact, financial woes are often what couples state as the reason their differences became irreconcilable.  Therefore, the situation often arises that divorce and bankruptcy are considered simultaneously.  While it’s possible to file for both at the same time, it’s important to keep in mind that divorce and bankruptcy are two completely separate legal processes, and each must be handled separately. 

In fact, if you file for a bankruptcy while you are in the middle of the filing process for divorce, the divorce proceedings can actually slow down your bankruptcy.  And while the court handling the divorce will be able to make decisions regarding custody, child support, and alimony while the bankruptcy process is happening, it will have no jurisdiction over the couple’s mutual property – only the federal bankruptcy court will have control over that. 

Also, bankruptcy and divorce can be tricky when it comes to jointly owned debt.  If you are required to pay off certain debts as part of your divorce decree and your bankruptcy discharges these debts, your creditors could still go after your spouse if his or her name was on the debt.  Your spouse can then take you back to divorce court to recover the debt, which will likely be granted since it was in the original divorce decree.  Chapter 7 and Chapter 13 bankruptcy also does not discharge child support or alimony that is owed to your spouse as part of the divorce decree. 

The best thing to do is to wait until the divorce is finalized before you begin your bankruptcy process.  When you do it this way, the bankruptcy court will look at your required alimony and child support expenses, and consider these when determining your required monthly expenses.   

Can I file for divorce and bankruptcy at the same time?