There are plenty of people that say the main reason why they filed for bankruptcy was because of their divorce. Is this the right choice?
Depending on where you live, your debt, the amount of property you have, and the types of bankruptcy, it might be in your best interest to file for bankruptcy ahead of the divorce.
This is an important decision to make and one you need to seriously consider. Read the following information and weigh your options before deciding what should come first: filing for divorce or filing for bankruptcy.
The Costs of Filing for Bankruptcy and Divorce
Whether your file for bankruptcy individually or jointly, you are going to spend the same amount either way. As a couple, if you intend to eventually file for divorce, it’s best to jointly file for bankruptcy ahead of time. This way you will save on additional court fees.
Another thing to consider is hiring a bankruptcy attorney. If you jointly file for bankruptcy, your attorney fees will be much less than if you were to do this on an individual basis.
It’s best to let the bankruptcy attorney know that you do intend to file for divorce. It’s smart to get this out in the open in case there is a potential conflict of interest if you both share the same attorney. Sharing this information ahead of time makes it much easier to help the attorney decide how to proceed.
Simplifying Debt and Property Division
Another advantage to filing for bankruptcy prior to a divorce is simplifying potential debt and property division issues that you might face during this difficult time.
Chapter 7 bankruptcy is based around liquidation. It’s a quick way to file for bankruptcy, and the process typically only takes a few months. It can be completed quickly prior to a divorce.
On the other hand, chapter 13 bankruptcy is often dragged out over many years. In fact, the process will typically take between 3 to 5 years. With Chapter 13 bankruptcy, you will still have to pay back some debts, and in other cases, you’ll have to pay back all of your debts, based on the repayment plan put in place during the proceedings.
So, if you plan to file jointly prior to your divorce, filing Chapter 7 bankruptcy is the best way to go. And on the other hand, if you intend to file Chapter 13 bankruptcy, it’s probably best to file for divorce first and then individually file for Chapter 13 bankruptcy when you are no longer legally connected to one another.
Figuring out which debt or debts belong to each spouse is often an expensive process to undergo during a divorce. And it’s very time-consuming as well.
If you have a loan together, you can also get the help of a professional like Swoosh with both refinancing and counseling.
Instead of going through the pain and suffering of debt allocation during the divorce, it’s easiest to liquidate your debts entirely by jointly filing for Chapter 7 bankruptcy before initiating any divorce proceedings.
Divorce counseling is an excellent option if you’re uncertain about your options and need expert help. Do not hesitate to seek help when needed.