A large number of people cite divorce as the main reason behind their bankruptcy
filing, and for good reason. Without proper planning, divorce can be a
complex and extremely costly process, putting individuals and couples
in a deep financial hole that can sometimes be insurmountable. By planning
ahead, however, couples can make both their bankruptcy and their divorce
simpler and more cost effective.
Should I File for Divorce or Bankruptcy First?
The decision to file for bankruptcy or divorce first will depend mainly
on your financial situation and area of residence. As a general rule,
bankruptcy will most often take precedence over divorce. Since the distribution
of your assets and debts during divorce cannot take place until your bankruptcy
is completed, there is no real way for you to do them both at the same
time. If you and your spouse’s income is too high to qualify for
Chapter 7 bankruptcy, you may want to divorce first in order to avoid a Chapter 13 repayment
plan. It is entirely possible that you may both qualify for Chapter 7
separately but not jointly.
On the flipside, filing for bankruptcy jointly before divorce may be desirable
as a means to address all debts under a single case, wiping a majority
of your debts clean and increasing your exemption amounts. This is especially
helpful if only one of you makes all of the money as it will increase
that spouse’s chances of qualifying for Chapter 7 bankruptcy. This
could also eliminate debts that neither you nor your spouse can afford
to pay for, such as expensive car loans or mortgages for homes that are
facing foreclosure. This will in turn minimize the fight over unsecured
debt during your divorce. It is important to note, however, that if you
jointly file for
Chapter 13 bankruptcy, both you and your spouse will be responsible for the associated repayment plan.
Should I File for Chapter 7 or Chapter 13?
Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a type of
bankruptcy that requires you to sell your liquid assets in order to satisfy
creditors, with any remaining unsecured debts being discharged. This method
will usually allow you to receive a discharge within a few months of filing,
making it easy to be completed prior to divorce.
Chapter 13 bankruptcy, on the other hand, does not require you to sell
your assets. Instead, this process involves reorganizing your assets and
establishing a three to five year repayment plan. Since bankruptcy takes
precedent over divorce, you may not complete your divorce until the end
of your repayment period. For this reason, if you are looking to file
for Chapter 13 to avoid selling your property and assets, it may be a
better idea to complete your divorce first and file for bankruptcy separately
after your separation.
Bankruptcy Lawyer in Boca Raton
If you and your spouse are looking to file for bankruptcy, the
Boca Raton bankruptcy attorney at the Law Offices of David Kovari, PA can help you determine a strategy
that guards your assets and best fits your individual needs. With nearly
20 years of dedicated legal experience, we can provide the strong legal
guidance you need to get back on the road towards financial freedom.
Schedule a consultation or call (800) 843-1165 today to find out more about how we can assist you.