Deciding whether to file for divorce or for bankruptcy relief first can be a complicated decision. Some people assume that filing both cases at the same time will get the matters over with quickly so they can move into the next phase of their lives debt-free.
However, having two legal matters ongoing at the same time can be stressful. It can also cause problems in each of the cases. Before you file for bankruptcy relief, tell your attorney if you are contemplating a divorce action. Likewise, if you are in the middle of a divorce or you want to file for divorce soon, let your divorce attorney know you may need to file a bankruptcy case.
Divorce and Bankruptcy — Which Comes First?
There are cases in which filing a bankruptcy case before you file for divorce can be helpful. If you and your spouse have debts you cannot pay, filing a joint bankruptcy case saves money. You pay one attorneys’ fee, filing fee, and bankruptcy course fee for both of you instead of paying double.
Filing a bankruptcy case before a divorce also makes debt division easier. If you get rid of debts you and your spouse cannot pay, you do not need to argue about dividing this debt during your divorce case. Also, if neither you nor your spouse wants to keep the marital home or a vehicle that has a lien on the title, you can surrender these assets in a Chapter 7 case in full satisfaction of the lien. Therefore, you will not need to worry about a deficiency judgment or wage garnishment for the debt in the future.
Other Considerations About Bankruptcy and Divorce
If you or your spouse need to file Chapter 13, you may want to wait until after the divorce is finalized to file bankruptcy. A Chapter 13 bankruptcy case typically takes over five years to complete. Being financially tied to your ex-spouse for five years after your divorce can create problems.
Also, a careful analysis of you and your spouse’s income is required to determine if you meet the income qualifications for Chapter 7. Depending on your financial situation, you and your spouse may qualify for a Chapter 7 case together, or you may need to wait until after the divorce to qualify for Chapter 7.
Keep in mind that bankruptcy does not discharge alimony or child support obligations. Therefore, it does not matter if you file for bankruptcy relief before or after the divorce, you still owe your domestic support obligations.
Communicate With Your Divorce Attorney and Bankruptcy Attorney in Scottsdale
With your permission, your divorce lawyer and Scottsdale bankruptcy lawyer can talk to each other about your case. By working with a divorce attorney and a bankruptcy attorney at the same time, you can benefit from a comprehensive analysis of all factors that impact your divorce action and bankruptcy case.
Your attorneys can develop a strategy that gives you the best chance of achieving the outcome you want during your divorce while taking care of your debt problems. When both cases are complete, you can move forward into life after divorce without the burden of debt.
Make sure that you keep both attorneys informed of any developments in your situation that could impact either case.
Contact Our Scottsdale Bankruptcy Attorneys for More Information
We are here to help you regardless of whether you want to file a bankruptcy case now or after your divorce. We work with you and your divorce lawyer to make sure that your best interests are protected in both legal matters.