Unfortunately, some individuals may need to file for bankruptcy relief at the same time they are facing a divorce action. However, two legal actions at the same time can be emotionally overwhelming. Even if someone can handle dealing with both legal matters simultaneously, filing divorce and bankruptcy at the same time may not be in the person’s best interest. Having both matters pending at the same time could result in negative consequences in one or both matters.
Should I File For Bankruptcy Relief Before or After My Divorce?
Deciding when to file for bankruptcy relief is an important factor that you need to discuss with your Gilbert bankruptcy lawyer. In some situations, it could be better to file for bankruptcy relief before you and your spouse file for divorce.
Some of the reasons to file for bankruptcy before a divorce include:
- If both spouses need to file for bankruptcy relief, a joint bankruptcy case saves money for both spouses. Only spouses can file a joint bankruptcy case. Filing separate cases would result in double the costs.
- Filing a bankruptcy case gets rid of joint and individual debts, which eliminates the need to divide debts during the divorce action.
- By getting rid of debts the parties cannot afford to pay, each party is better prepared financially to support themselves on a single income.
- The parties can surrender homes or vehicles through the bankruptcy case that they do not want to keep to eliminate the secured debts on those items.
Chapter 7 vs. Chapter 13 Before Divorce
Filing a joint Chapter 7 case may be beneficial before the divorce because the bankruptcy case can be filed and completed in about six months.
However, the spouses may not qualify for a Chapter 7 case before the divorce because they do not meet the income requirements based on joint income. After the divorce, the spouses may qualify for Chapter 7 based on their individual incomes and households. A bankruptcy attorney can compare the two scenarios to determine what is best for each spouse.
If either spouse needs to file a Chapter 13 case based on their income, the need to protect assets, or pay non-dischargeable debts, the scenario changes significantly. Most Chapter 13 cases have a 60-month repayment plan. Therefore, ex-spouses could be tied together financially through the Chapter 13 case for five years after the divorce is final. Most ex-spouses do not want to be tied financially to their ex’s after the divorce.
Working with a Divorce Lawyer and a Gilbert Bankruptcy Lawyer
You must work with your divorce lawyer and your Gilbert bankruptcy lawyer to determine when to file bankruptcy and what chapter of bankruptcy to file to protect your best interest. Your attorneys, with your permission, can discuss the matters to develop a plan that gives you the best chance of receiving the outcome you desire in both matters.
Each divorce and bankruptcy case are unique. Your financial situation and the details of your divorce case impact your choices and the potential outcomes in both the bankruptcy case and your divorce action. Without careful consideration of all issues that could arise and how the cases could impact each other, there is potential for consequences that could have long-term impacts on your financial wellbeing.
If you are struggling financially, before you file a divorce action, consult a Gilbert bankruptcy lawyer to learn about your bankruptcy options. Ask your attorneys to work together to determine what is in your best interest.
Contact Our Gilbert Bankruptcy Attorneys for a Free Case Review
We understand that you may be going through a very emotional and challenging time in your life. If you have questions about bankruptcy and divorce, contact Allegiant Law Group by calling 602-562-1000 to schedule your free consultation with a Gilbert bankruptcy lawyer.