It is no secret that marriages falter when finances become stressful. For that reason, divorce and bankruptcy often go hand-in-hand. Financial stress is rated the second leading cause of divorce, behind adultery. Many couples that go through a divorce have commensurate financial issues as well. Divorce can seem like one more stressor on top of the pile. But it’s also a way out of the situation they currently find themselves in.
Those who want to file for divorce and bankruptcy must understand that timing is important. You have three options. You can either file your bankruptcy before the divorce, during the divorce, or after the divorce. Below, we’ll discuss the three options and how they work.
Filing for Bankruptcy Before Your Divorce
Filing for bankruptcy prior to your divorce has pros and cons. If you file for bankruptcy as a couple, you will only have to pay for one bankruptcy filing. This can save you money. You will also be able to share legal fees between two parties as opposed to absorbing those on your own.
Filing for bankruptcy first can also make it easier to divide property. In a typical divorce, assets, and liabilities are distributed evenly among the spouses. If you secure a discharge of your debts through a Chapter 7 filing, you will have fewer debts to divide, making the divorce process simpler.
However, it may depend on which type of bankruptcy you intend to file. Under Chapter 13, it may be better to wait until after the divorce is finalized because you will be repaying your creditors. If you plan on filing under Chapter 7, it may be better to do so together before the divorce is finalized.
Filing for Bankruptcy During Divorce
Most people will not choose this option. It is generally not a good idea to file for bankruptcy and divorce at the same time. You will have much better luck filing for bankruptcy before or after your divorce is finalized. The divorce and bankruptcy cases will impact one another, causing delays in both cases. When you file for bankruptcy, your non-exempt assets become part of the bankruptcy estate. Your marital estate is what gets divided during a divorce. If you have no non-exempt assets, then it would not really matter, but it would still be cheaper to file together than separately if it makes sense to do so.
Filing for Bankruptcy After Divorce
Filing for bankruptcy after divorce is best if you plan on filing under Chapter 13. Chapter 13 involves the repayment of creditors up to a certain amount. It could be the best way to retain valuable property. However, you would be filing singly and not with your spouse, which could cost more for both of you.
In some cases, it may be best to wait until after your divorce if your combined income with your spouse is too high to qualify for Chapter 7. You may be able to qualify under Chapter 7 after your divorce is finalized.
Talk to an Indiana Bankruptcy Lawyer Today
If you are going through a divorce and struggling with debt, Chris Arrington can help you with both matters. Call our office today to schedule an appointment, and we can begin discussing your next moves immediately.