Divorce and bankruptcy tend to go hand-in-hand -- money woes may have been one of the factors that led to your divorce in the first place, or you simply may have come to the stark realization that you can't swing your debts and operate two households at the same time. The one question you may have a hard time deciding is whether you should file your bankruptcy petition before or after your divorce. This is what you should consider.
1. While you can file for divorce and bankruptcy at the same time, doing so is going to seriously delay your divorce proceedings. Getting a divorce is essentially a financial transaction -- it comes down to dividing up both assets and debts, both of which will be tied up in any bankruptcy proceedings if you file simultaneously.
2. If your spouse also plans to file bankruptcy, it's cheaper to file jointly than to file two separate actions. In addition, the exemptions -- which allow you to keep certain assets -- are higher for a married couple than for a single person.
3. Filing bankruptcy prior to your divorce would give you a better idea of what your finances are going to look like once you're on your own. Not all debts are dischargeable in bankruptcy -- for example, student loans are only rarely dischargeable, so you or your spouse could be stuck with some debt left over. Knowing exactly how much of your income you'll be able to keep after your non-dischargeable debts are paid can make starting over a lot easier.
4. If you file bankruptcy after you get divorced, you're more likely to have to go back to family court on issues like spousal support and child support. Spousal and child support often takes into account a person's other debts, although they are prioritized above things like unsecured credit card debt. However, if the judge in your divorce lowered your child support or spousal support payment based on bills you no longer have after the bankruptcy, that would be a reason for your ex-spouse to ask for a modification of support.
5. Filing bankruptcy first allows you to know exactly what assets you'll be able to keep. If you wait until after your divorce, you may find that something you negotiated over during the divorce in order to keep is now collateral damage in your bankruptcy. That would be frustrating, to say the least.
Keep in mind that each situation is unique and that there are always exceptions when it comes to legal situations. Before you decide, talk the situation over with both your bankruptcy attorney and your divorce attorney to make sure that you're making the right decision for your case. Contact a professional like Gilbert P Kaback to learn more.
