Unfortunately, sometimes the prospects of bankruptcy and divorce both arise at the same time. When they do, how do you manage both of them, and is there one that you should handle before the other? Here is a look at how to handle bankruptcy and divorce when they happen at the same time.
Bankruptcy before divorce
Filing for bankruptcy before divorce can offer a few key advantages. First, you have the opportunity to file jointly with your spouse. This can help you save on court and attorney fees, as you are dealing with only one filing instead of two. In addition, filing jointly with your spouse before divorce can help simplify issues of property and debt division during the divorce process later. This will save you a great deal of heartache, not to mention time and money during the divorce process.
Keep in mind that the type of bankruptcy you are filing for may very well influence your decision here. If you are filing for chapter 7 bankruptcy, through which you can receive a discharge within just a few months, it makes a lot of sense to file for bankruptcy before divorce. If you are filing for chapter 13 bankruptcy, on the other hand, it sometimes makes more sense to file separately after divorce, as the repayment plan under a chapter 13 lasts three to five years. But there are exceptions and cases where a 13 is still better.
Divorce before bankruptcy
Of course, sometimes filing for bankruptcy with your spouse before divorce simply isn’t possible. Or, if you and your spouse are not on good terms, then it is typically best to consider divorce before filing for bankruptcy.
There are additional advantages to filing for divorce before bankruptcy. First, if you and your spouse are in a state that does not allow you to double your exemptions in a joint bankruptcy, and you own more property than you can exempt in a joint bankruptcy, it makes sense for you and your spouse to file separately after divorce. (Some states allow you to double your exemptions when filing a joint bankruptcy; others do not.)
Here is another scenario in which filing for divorce before bankruptcy can be advantageous. If you are filing for chapter 7 bankruptcy before divorce, you may need to include combined income in the bankruptcy filing. Your combined income may disqualify you from filing under chapter 7. If you were to wait until after divorce, when you and your spouse have two separate households, you may each quality for chapter 7 bankruptcy with your individual incomes.
As you can see, there are a lot of factors that you need to weigh when deciding whether to file for bankruptcy before or after divorce. Rulon T. Burton & Associates, located in Utah, can help you determine what is most advantageous for you, as we specialize in both bankruptcy and family law. Contact us today to start taking care of your legal needs.