As we've discussed on this blog before, while divorce can be an emotionally trying time, it can also be a financially difficult time, too. Marriage dissolution often leaves individuals facing money woes, and quite frequently, those financial difficulties contribute to the divorce itself. When debts owed become too overwhelming to keep up with, it may be time to consider bankruptcy. But how does that play out when one is considering divorce?
It depends on the circumstances. For example, if an individual and his or her spouse are on good terms, than it may be worth filing for joint bankruptcy. This will allow the couple to share the cost of attorney and filing fees. Yet, if Chapter 7 bankruptcy is the best option for an individual, then filing jointly may not be an option because it may push one over the income limit.
While determining whether to file for bankruptcy pre- or post-divorce is up to an individual, one thing is sure: don't file for bankruptcy and divorce at the same time. Bankruptcy puts an automatic stay in place that allows the courts to easily identify assets and debts. If divorce proceedings have begun, then it may be impossible for a family law judge to divide assets on account of the stay that a bankruptcy court has put in place. This can lead a divorce that is longer and more drawn out than it needs to be.
There are many issues to take into consideration when dealing with bankruptcy and divorce. Another example is where a couple jointly files for Chapter 13 bankruptcy and later divorces. Here, one party can seek to restructure the payment plan that was put in place. This may or may not be beneficial, as is true of all the decisions discussed above. In an attempt to gain clarity and advice, those who find themselves in these precarious predicaments may want to seek counsel from a skilled legal advocate.