Divorce and bankruptcy often go together. Financial stress can strain a marriage, and a divorce can complicate an already tight financial situation. When faced with both, the question arises: which should you tackle first?
Marital and individual debts
Divorce and financial challenges often intersect. During a marriage, couples typically accumulate both joint and individual debts. Joint debts are those incurred together, like a mortgage or shared credit cards. These can persist even after separation. If only one spouse files for bankruptcy, creditors may pursue the other spouse for joint debts. This scenario requires careful planning.
You can file for bankruptcy individually or jointly. Filing jointly might discharge joint debts, potentially benefiting both parties. Consulting a bankruptcy attorney can help determine the best approach based on individual circumstances.
Benefits of filing bankruptcy first
Filing for bankruptcy before divorce can be financially wise. It allows couples to file jointly, reducing costs. Joint filing fees are the same as individual ones, so couples can save money. Hiring one attorney for a joint bankruptcy is cheaper than hiring two for separate cases.
Additionally, some states permit doubling exemptions for married couples. This means more property protection from creditors. If both spouses anticipate bankruptcy, filing before divorce may be advantageous.
Benefits of filing divorce first
In some cases, filing for divorce first is better. This is especially true if you and your spouse have high incomes. To qualify for Chapter 7 bankruptcy, income must be below a certain threshold. If your combined income is too high, filing individually post-divorce could make you eligible. By separating first, you might have a better chance at Chapter 7 if your income alone qualifies.
Deciding the order of filing requires careful consideration. Each couple’s financial situation is unique. Consulting with both a bankruptcy attorney and a family law attorney is wise. They can provide guidance tailored to your circumstances.
Whether to file for divorce or bankruptcy first depends on your specific situation. Consider your debts, assets, and income levels. Remember, informed decisions can lead to better financial and personal outcomes.