If both bankruptcy and divorce seem to be in your future this year, it can be an overwhelming feeling. It’s not uncommon for people to be in this situation. Financial problems are one of the most serious sources of conflict in a marriage.
The past couple of years have been particularly difficult on people’s finances. Whether you’re facing unemployment, overwhelming medical bills or a mountain of credit card debt, you’re far from alone.
One key question you need to answer is whether you should file for bankruptcy or divorce first. The good news is that you likely won’t have to deal with them simultaneously. Even if your spouse has already filed for divorce, the bankruptcy court will probably suspend any case you’ve begun until the divorce is finalized and the property and debt division is agreed upon.
When is dealing with bankruptcy first the best choice?
If most of the debt you’re looking at is marital debt, such as debt you’ve both accumulated on joint credit cards, and you’re able to work together to file a joint bankruptcy, then getting that over with before divorce is probably advantageous.
By filing for Chapter 7, you can discharge a considerable amount of your debt and have fewer assets to divide up. Unlike with Chapter 13, where you have to work out a repayment plan, your bankruptcy will be over once your debt is discharged.
When is divorcing first the better option?
If your joint income is too high to qualify for Chapter 7 together but you could qualify once you’re divorced, you may choose to do that. If the debt primarily belongs to one of you, the other one may not need to file for bankruptcy separately and can avoid having it on their credit record.
It’s a lot to think about, and what’s best for you and your spouse depends on your unique situation. The best place to start may be determining what type of bankruptcy you can qualify for both separately and together. It’s wise to seek experienced legal guidance