Divorce And Bankruptcy: What You Need To Know
What could be worse than going through a divorce? How about ending your marriage and filing for bankruptcy at the same time? In many cases, the two events do happen at the same time. Maybe a couple has been stressed out so much over finances that they have no money and their marriage is failing. Or maybe a divorce is so expensive that a person has to file for bankruptcy.
Because these are two major events, you actually shouldn’t do both at the same time. That will only complicate matters. Instead, opt for one first. But which one?
Many say it’s better to file for bankruptcy first. That’s because this action can cancel marital debts that would have to be divided during a divorce proceeding. If you and your spouse can file jointly for bankruptcy, that would streamline the process even more. Plus, you would probably be able to keep more of your assets than you would if you divorced first.
However, there are situations when divorcing first could be beneficial. This primarily has to do with the income requirements for bankruptcy. There are two types of bankruptcy: Chapter 7 and Chapter 13. Chapter 13 allows for a repayment plan, while Chapter 7 eliminates your debts completely. To qualify for Chapter 7, though, your debt needs to be below a certain amount. This can be hard when a person is married, since all income is combined. If a person earns a lot less on their own, then it would be beneficial for them to wait until the divorce has been finalized.
If you do choose bankruptcy first, opt for a Chapter 7 one, if you can. Chapter 7 bankruptcies are often finalized in less than six months, which can make for a quick divorce. If you choose a Chapter 13 bankruptcy, you’re dealing with a repayment plan that can last 3-5 years. This can drag on your divorce for that long, which is something you want to avoid.
If you do opt for Chapter 7 bankruptcy, though, make sure you understand what’s involved. Not all debts are included, so you’ll still be on the hook for some debts. These include student loans, alimony, child support, court fines, money owed to government agencies, and lawyer fees.
Keep in mind that if you and your spouse hired a divorce attorney together, and you want to file for bankruptcy, you will need a new attorney. That’s because you both will be in another legal battle, and this creates a conflict of interest for your lawyer. This can cost a lot of time and money.
Seek Legal Help
Finances and relationships are very much connected, so it’s not uncommon for couples to consider both divorce and bankruptcy at the same time. While both offer a fresh start, there are some things you should know about these processes so you can make things less stressful and complicated.
Fort Lauderdale divorce lawyer Edward J. Jennings, P.A. can help you deal with money matters during a divorce. Let him guide you through the process with less stress. To learn more, schedule a consultation. Fill out the online form or call 954-764-4330.