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Consider all the implications of bankruptcy and divorce timing

Bankruptcy isn't uncommon either just before or just after divorce -- after all, financial woes are one of the biggest areas of stress in a marriage and may be what has driven an irreparable wedge between you and your spouse in the first place.

However, there are significant issues that have to be addressed before you decide which legal issue to address first:

1. Should you and your spouse file bankruptcy together? If you are both in the same financial straits, you may want to cooperate to clear yourselves of as much debt as possible before your divorce. It could potentially make the divorce run more smoothly without debts to divide. It may also make the realities of running two separate households easier to handle when neither of you are starting over with a significant financial burden.

2. You may find filing together more advantageous if you are filing a Chapter 7, or total bankruptcy. Unlike a Chapter 13 bankruptcy, which requires a long-term payment plan, Chapter 7 wipes out all or most of your debts (some exceptions are generally student loans and support payments). There are exemptions in a Chapter 7 that can allow you to keep much of your property -- but those exemptions are bigger for married couples than they are for individuals.

3. If finances are already an issue, it's simply cheaper to file the bankruptcy together. The cost for a couple to file bankruptcy is the same as it is for an individual -- so divorcing first essentially doubles what you will have to pay to file bankruptcy.

4. If either of you have income that would make a Chapter 7 bankruptcy impossible because that person won't meet the income limitations, filing together may allow that person to go through Chapter 7 once the other spouse's income is factored in. On the other hand, if one of you is going to have to file Chapter 13 anyhow, there's probably no good reason to file together or wait on the divorce.

While divorce and bankruptcy often go together, it's important to carefully consider the appropriate timing of each and there are a lot of other things that should be considered beyond what is addressed here. For information on how our firm can help you better understand the implications of your financial decisions on your divorce, please visit our web page.

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