Unfortunately, one of the most common causes for divorce is money. In some cases, one or both spouses will need to file for bankruptcy in order to handle issues with money and property. However, some may be leery about filing for both bankruptcy and divorce at the same time. You will have to think about several different things when making this decision. It will vary from couple to couple based on different circumstances. Here are some things to consider if you are thinking about bankruptcy during a divorce:
Think About Your Property
In a bankruptcy, any property you own together is included. Filing a joint bankruptcy before the divorce can have some benefits. You will need to ensure that your state allows you to have enough exemptions that will protect your property. These exemptions will determine how much of your assets you will be able to retain after the bankruptcy. If you file jointly before you are divorced, you will be able to have twice as many exemptions. If you and your spouse do not have any major assets, you would be better to file separately after divorce.
Consider Chapter 7 and Chapter 13
The next thing to consider is which type of bankruptcy you are going to file. Chapter 7 will get rid of unsecured debt such as signature loans or medical bills. This process is typically complete in a few months and can be finished even before your divorce is final.
Chapter 13 bankruptcy is much more complicated and will take longer, sometimes several years. This type of bankruptcy will require you to repay your debt on a plan. If you are considering Chapter 13, it is better to do so after the divorce is complete so that you are in charge of your payments only rather than being connected to those of your former spouse.
Repay Debt Responsibility
When timing your bankruptcy, you should also consider who would be paying which debt once you decide to divorce. If you are not confident in your former spouse's ability to split bills after you are divorced, it may be best to wipe them out with bankruptcy before you file divorce if it was already in your financial plans. If one spouse does not pay for their portion, creditors can come after the other spouse for the entire balance. Having everything sorted out before the divorce will make the process much more simplified.
For more advice, talk to a divorce lawyer near you. It may be a good idea to involve a bankruptcy lawyer as well.
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