Unfortunately, many couples choose to divorce because of financial problems. Moreover, even when money is not the central issue, a divorce can cause financial turmoil. Therefore, it is smart to start thinking about a possible bankruptcy early. It is not uncommon for a client to ask, "Should I file bankruptcy or divorce first?" Today's article looks at the factors to consider when making your decision.
- Type of Bankruptcy - If you expect to file a simple Chapter 7 Bankruptcy, filing before the divorce may be a good option. This is especially true if you can convince your future ex-spouse to file jointly. A Chapter 7 is relatively fast and straightforward, and will not impede the divorce. On the other hand, a Chapter 13 is much longer and more involved, and can take 3 to 5 years. Adding a divorce into the mix can complicate things and add to your costs.
- Income - While filing jointly before the divorce does have some benefits, including being less costly for both parties. However, when filing jointly, your total household income is a factor. This means that the combined income with your spouse may be too high for a Chapter 7. If this is the case, it may be better to wait until after the divorce.
- Assets - It is best to work with an attorney familiar with both bankruptcy and divorce, and who can best protect your assets. Jointly owned property can cause delays in the divorce if the bankruptcy is filed at the same time, adding to the cost of both. There needs to be an evaluation of your unique situation to determine which should be tackled first, bankruptcy or divorce.
- Collaboration - A final consideration is the level of goodwill between you and your soon-to-be ex-spouse. If the divorce is generally amicable and collaborative then filing bankruptcy first is a good option. However, if there is hostility, a bankruptcy can cause more harm than good. You need to have confidence that your former spouse will provide essential documents and show up at court.
What haven't we covered yet that is important to you? If you would like to talk about if you should file bankruptcy or divorce first, or need more information, please contact us.