Divorce is often an emotionally difficult chapter in one’s life. When faced with the real possibility of having to file for bankruptcy at the same time, it can feel overwhelming. If you and your wife or husband have decided that divorce is your only option, your financial life is likely to be affected as well. In fact, divorce is a common instigator for filing for bankruptcy. Before you pursue bankruptcy, talk to your family law attorney about the possible ramifications. If you decide to proceed with filing for bankruptcy, consider hiring an attorney who focuses on that area of the law. They can ensure that the process goes as smoothly as possible and that it is resolved in a timely manner.
In advance of seeking legal advice, here are 3 things that you should understand about how filing for bankruptcy and divorce can affect either or both processes.
- Filing for bankruptcy and divorce at the same time is usually a bad idea.
Based on the advice of your family law attorney or bankruptcy attorney, you may decide to begin with bankruptcy or with the divorce proceedings. Everyone’s situation is different and one variable can tilt the decision in one direction or the other.
The reason for not overlapping the two processes is this: Whether filing a Chapter 7 or a Chapter 13 bankruptcy, an automatic stay is placed on your assets and property. This motion prevents creditors from contacting you. And during this period, the bankruptcy court determines what assets you own, their value, and what debts you owe to creditors. The hold remains in place until the bankruptcy action is completed. If you file for divorce during bankruptcy, because of the hold it will be impossible to divide you and your spouse’s debts and assets. This may extend the time it takes to complete the divorce.
- Consider the advice of your attorneys when deciding which action to file first.
There are pros and cons to each choice, but your attorneys who are familiar with the details of your particular case can provide the insight you need in order to make an informed decision.
Filing bankruptcy first allows the two of you to share the cost of the attorney and filing fees. If you own property together, it may protect you from having to pay joint debt. Your bankruptcy attorney can tell you if you qualify for double exemptions on your assets should you file for joint bankruptcy.
An advantage to filing for divorce before filing for bankruptcy is that if you both file for pre-divorce, then your joint income may make you ineligible for Chapter 7 bankruptcy.
- If you would like a quick divorce, Chapter 7 is usually the best choice.
A Chapter 7 bankruptcy is the preferred option for many people because the process is faster than Chapter 13. Whereas Chapter 7 typically takes three to six months to discharge all of the filer’s debt, Chapter 13 can take as long as three to five years as it’s based on a payment plan schedule.
To learn more about how divorce and bankruptcy processes can impact one another, talk to a bankruptcy lawyer in Waterbury, CT as well as a divorce lawyer.
Thanks to The Law Offices of Ronald I. Chorches for their insight into bankruptcy law and divorce.