Financial issues are one of the top reasons for divorce in the United States. If you are headed towards filing for bankruptcy and divorce, you may be wondering which to begin with. Financial pressures don’t always resolve when you get divorced, it is likely that you may be in a worse financial situation after a divorce. If you are going to endure both processes, then it may be better for you to file for bankruptcy first, before continuing with divorce proceedings.
Reasons to Pursue Bankruptcy Before Divorce
1. Save Money by Filing Jointly
If you are still married, you may file for bankruptcy together, this is a joint case. The advantage to this is that you will only be charged one fee for filing paperwork, one copy of necessary documents and court schedules, one creditors meeting and one fee for attorney’s services (if you only have one attorney representing both of you). Generally an attorney will not charge extra for a joint case than separate individual cases, though they may charge a fee to pay for the added work involved.
2. Free Yourself From Joint Debt Liability
When you file before your divorce, you are free from the liability to pay your debts. If you divorce prior to filing, it may harm you because part of a divorce settlement is an agreement to pay off some of the joint debt accrued during the marriage. If you file after the divorce, you will be free of your debt, but not the promise you made in the settlement to cover your ex spouse’s liability. If you file before the divorce, you are not liable for that debt and you will not be forced to pay it in the divorce agreement.
3. Don’t get Stuck With All of Your Debt When Your Spouse Files
You will be stuck with all of the debt if your spouse files for bankruptcy either before or in conjunction with divorce proceedings and you decide not to. Your spouse likely has filed for bankruptcy to discharge their liability on joint debts. Now you are stuck with the liability for the joint debt.
4. Increase Exemptions When Filing Jointly
You may keep an amount of property in order to begin your life again if you file for bankruptcy. That property is called “exemptions”. There is usually a cap on exemption amounts. In a few states, you and your spouse will be awarded a complete set of exemptions each.
5. Save Time, Together!
In cases that aren’t so amicable, one spouse may try to file for bankruptcy during the divorce process in order to gain an advantage. This causes a delay in the divorce because the judge has to decide if the divorce case may go on simultaneously with a bankruptcy case. It may also cause issues because the bankruptcy judge may take over property settlements which will cause a delay in both cases.
Filing jointly before the divorce will discharge most of your debt including personal loans, medical costs, and credit cards. This, in turn, makes the divorce process much easier because it will ease the process of property division and debt negotiation.
Consult a Professional
Divorce is almost never easy, but if you and your spouse are facing financial troubles along with marital ones, it could be beneficial to care for the financial issues to make the divorce less painful. If you are considering pursuing bankruptcy, before, after or during a divorce, it is best to consult an experienced bankruptcy attorney such as the bankruptcy lawyer Bloomington IL local turn to. They may help you decide when it is right for you,, and if it is right for you to file based on your unique circumstances.
Thanks to authors at Pioletti&Pioletti for their insight into Family Law.