Bankruptcy Or Divorce First? How To Decide

30 November 2015
 Categories: Law, Blog


If you are considering filing for both bankruptcy and divorce, you should know the order in which you proceed could be important. Either one of these life-altering events can be stressful on its own, but careful consideration of how each issue can affect the other could make a difference. Read on for more information about filing for both bankruptcy and divorce, and how to determine the order of filing.

Type of Filing: Chapter 7 or Chapter 13?

Since a chapter 13 bankruptcy requires a two-to-five year financial reorganization plan, divorcing couples should put off this type of filing until the divorce is final and file individually on their own, if necessary. Keep in mind that the division of assets and debts in the divorce filing can greatly affect your chapter 13 filing, since you will emerge from divorce with less or more debt or property.

Chapter 7 Before Divorce

Unlike a chapter 13 bankruptcy, a chapter 7 bankruptcy can be completed in a matter of months. With the exception of taxes and student loans, all debt can be eliminated before your divorce process even begins. With a bankruptcy behind you, you could have a quicker and less-acrimonious divorce since you will be eliminating a major area of conflict in divorce agreements: the division of debt.

Additionally, filing for chapter 7 while still married could garner each of you a larger exemption and thus allow you to keep more of your property. Exemptions are dollar amounts that can be deducted from property you own. You are only allowed to keep a certain amount of real estate, automobiles, jewelry, art, etc. with a chapter 7 filing, but by filing jointly your exemptions could be doubled.

When You Should Divorce First

For chapter 7 bankruptcy filing, your income cannot exceed the median income for your state. For those whose income is too high to file jointly, you may be able to file singly once you are divorced. It should be noted that filing singly while still married is possible, but the income and assets of your spouse will be taken into consideration by the bankruptcy court. A means test calculation can help give you a general idea of income limits, but a consultation with a bankruptcy attorney is vital since there are other factors to be taken into account that could influence your decision, such as what is defined as income and household size.

The best order of filing can be a complicated and confusing matter, so contact a divorce and bankruptcy attorney to get more specific information about your particular situation. Planning ahead for these major events could help you to emerge with a better financial outlook.

Contact legal professionals like Bauer & French Attorneys at Law to learn more.


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