Find out if You Should File for Bankruptcy Before or After Divorce
Since bankruptcy and divorce often go hand-in-hand, there are a lot of questions surrounding the issue.
The most common question we get are people asking, “Should I file for bankruptcy before or after divorce?”
It’s a valid question and the answer is not always black-and-white, but there are some things you should consider when deciding if you should file for divorce first or bankruptcy.
Making the right decision for your situation is based on a number of factors, including what state you live in, how much property you own, how much debt you have, and what chapter of bankruptcy you want to file.
Below, the Credit Solutions’ bankruptcy lawyers have provided some important information to help you with your decision.
Filing for Bankruptcy Before Divorce
Filing for bankruptcy before divorce helps get rid of the debts that you and your spouse share, such as credit card debt or medical bills. It can also increase how much debt can be wiped out (exempt) from what you owe.
Filing for bankruptcy before divorce can also get you and your spouse out of contracts that you don’t want, like car loans or mortgages that are underwater.
Filing for bankruptcy before divorce can also be worthwhile if your spouse makes more or all of the money, since this can improve your chance of qualifying for Chapter 7 bankruptcy.
Filing Chapter 7 Bankruptcy Before Divorce
The reason why it can be better to qualify for Chapter 7 when dealing with bankruptcy and divorce is that the bankruptcy process is much quicker – usually about 90 days, so you can move forward with divorce faster without being delayed by the bankruptcy process. Chapter 7 bankruptcy also allows you to get rid of unsecured debts.
Filing Chapter 13 Bankruptcy Before Divorce
On the other hand, Chapter 13 bankruptcy takes 3-5 years and you are not able to get rid of unsecured debts. Plus, if you and your spouse file for Chapter 13, you are both responsible for the repayment plan.
If you choose to (or have to) file for Chapter 13 bankruptcy, it may be better to get divorced before filing for bankruptcy, since the Chapter 13 process takes much longer.
Filing for Divorce Before Bankruptcy
If your income is too high to qualify for Chapter 7, it might be better for you to get divorced before filing for bankruptcy, so you’re not tied into a 3-5 year repayment plan with your spouse under Chapter 13 agreements.
In some cases, if you get divorced before you file for bankruptcy, you and your spouse could each qualify individually for Chapter 7, where you could only qualify for Chapter 13 as a married couple.
Filing for Bankruptcy During Divorce
Filing for bankruptcy during a divorce is not recommended. This causes the process of dividing assets come to a screeching halt. Now, your divorce attorney has to understand bankruptcy law to protect you and your property.
Since bankruptcy affects how income, debt and property are handled in a divorce, it’s almost always better to take care of one before starting the other.
In most cases, it’s best to file bankruptcy before divorce.
Plus, since bankruptcy filing fees are the same whether you file together or separate, you can actually save money by filing jointly. You can also save money on bankruptcy lawyer costs by filing jointly too.
How our Bankruptcy Law Firm Can Help You
For many people divorce is the biggest reason for filing bankruptcy.
If you’re thinking about filing for bankruptcy and divorce, it’s in your best interest to talk to a bankruptcy lawyer first since filing for bankruptcy before divorce may simplify the process and save you money in the long-run.
Every day, Credit Solutions helps people file for bankruptcy in Illinois and Wisconsin. Our bankruptcy law firm prides itself on helping people find solutions for better living.
Credit Solutions specializes in Chapter 7 & Chapter 13 bankruptcy. We also specialize in Wisconsin’s bankruptcy alternative, Chapter 128.