If you find yourself in the unfortunate circumstances of needing to file for a divorce and for bankruptcy, you have to do it right. It is nearly impossible to file both at the same time without delays in one or both proceedings. Depending on your situation, you will need to file for divorce or for bankruptcy first and allow the process to complete before filing the next case.
Filing for Bankruptcy and Divorce at the Same Time Slows Down the Process
When you file for divorce, your assets and debts are divided between the two parties that are splitting up. When a bankruptcy is filed, all assets and debts become part of the bankruptcy estate. It isn't possible to divide property until the bankruptcy has been discharged, and this will slow down your divorce.
Filing for Bankruptcy Before Filing for Divorce Is Optimal If there Is Significant Marital Debt
If you need to file Chapter 7 bankruptcy because of significant medical bills, credit card balances and other unsecured debt, filing jointly prior to divorcing makes sense. This will discharge marital debt and make it easier to determine how any property that is left gets divided. Court fees for filing for bankruptcy are the same whether you file an individual or joint petition, so it saves money to file together.
Filing the bankruptcy together has an added benefit in some states. By filing jointly, some states allow couples to double exemption amounts for filing together. The goal should be to have enough of an exemption to be able to keep property that the two of you own.
Chapter 13 Bankruptcy Is Better to File After a Divorce
Chapter 13 bankruptcy involves discharging some debt, and creating a payment plan to pay back any remaining debt. Filing for Chapter 13 bankruptcy prior to divorcing would mean that the two parties would have to continue to work together until the bankruptcy was complete. A Chapter 13 bankruptcy payment plan can take a number of years to pay back, and most divorcing couples want to be free of each other sooner than that. Talk to a lawyer like John G Rhyne Attorney At Law for more specifics on your situation.
Chapter 7 Bankruptcy Requires Income Verification
If the income of the divorcing couple is too high to file for bankruptcy, it might make sense to divide assets and debt, and file for bankruptcy separately. Each may choose to file on their own, or decide to pay down the debt that they took on as part of the divorce. If one party wants to file for divorce and their income qualifies, they can file for Chapter 7 bankruptcy alone.