Divorce Attorney Scott J. Stadler

    • 10 JUL 19
    Divorce or Bankruptcy: Which Comes First?

    Divorce or Bankruptcy: Which Comes First?

    As if divorce was not complicated enough, some couples decide to throw bankruptcy into the mix. The two processes are completely separate. A divorce ends a marriage, while bankruptcy eliminates debt. However, they both have one thing in common: They allow a person to walk away with a clean slate, so to speak.

    With a divorce, you can start over with your love life and find someone who is good for you. You may even decide to get married again. With a Chapter 7 bankruptcy, you can get rid of credit card debt, personal loans, auto loans and other debt that is weighing you down. While you will take a hit to your credit score, and could lose your car or house in the process, you will be able to start over and get your finances back on track.

    Many people decide on divorce and bankruptcy at the same time because one affects another. Finance issues tend to lead to divorce, and a divorce can cause money problems. Should you file for both simultaneously?

    Experts say no. Both processes can be complicated, so it is easier if you do one at a time. This is because a bankruptcy can delay a divorce, and vice versa. This can make the situation even more stressful for all involved.

    In some cases, filing for bankruptcy should be done, while in other situations, it may be better to get the divorce finalized first. If you are considering both, read on to determine the order that is right for your unique situation. A consultation with both divorce and bankruptcy lawyers can help you get the clarity you need so you can make the right decision.

    When Filing for Bankruptcy First Makes Sense

    Most people choose to file for bankruptcy first, then divorce. This is especially true for Chapter 7 bankruptcy. This is because once the bankruptcy is filed, an “automatic stay” goes into effect. This makes it so creditors cannot legally contact you about the debt throughout the entire bankruptcy process. During this period, the bankruptcy court goes through and determines what assets and debts you have.

    This can make it easier once you file for divorce. You will already know what you have, so this can make the property division aspect much easier. Since most of the debts should be eliminated, you should be able to go into the divorce with little debt. Going through bankruptcy first simplifies the process and even lowers the divorce costs.

    If you are considering Chapter 7 bankruptcy, it will be beneficial if you and your spouse file for joint bankruptcy while you’re married. You’ll save on lawyer fees and filing costs. Plus, assets may also play a factor in deciding when to file for bankruptcy. If you own joint assets, such as cars and houses, with your spouse, you will want to know how they will be protected. In some areas, a joint bankruptcy offers double exemptions. This means that filing for bankruptcy before divorce would work in both your and your spouse’s favor.

    When Filing for Divorce First Makes Sense

    If you choose a Chapter 13 bankruptcy, which is basically a debt repayment/consolidation plan, you may want to divorce first. Unlike a Chapter 7 bankruptcy, which is finalized in just a matter of months, a Chapter 13 bankruptcy can take three to five years. If you divorce during this time, the bankruptcy case will have to close or be separated. This will only cause the process to drag on, possibly delaying both your divorce and bankruptcy. Therefore, you should divorce first and then start the bankruptcy process, unless you would rather wait five years to divorce.

    Another reason why you might file for divorce first is if you and your spouse filed for joint bankruptcy, but your income is too high. This is a common problem for those filing for Chapter 7 bankruptcy. By waiting until after the divorce, you can use your income only and get qualified.

    You may also want to divorce first if you and your spouse are not on good terms. If your spouse is hostile and not willing to work with you, then getting him or her to agree to a bankruptcy will be next to impossible. You would need to rely on your spouse to show up to court, which will only result in heartbreak. You could file on your own, but doing it together streamlines the process. In any case, it may be less stressful to get the divorce first and worry about the bankruptcy once the divorce is finalized.

    In some cases, you might not even realize you have financial problems until after the divorce. Going from one residence to two can be costly. You are paying for everything on your own. You may soon discover that you do not have enough money to pay all your bills and debts, even after selling some possessions and taking on multiple jobs. In this case, bankruptcy after divorce would apply.

    Seek Legal Help

    Both divorce and bankruptcy are huge decisions. Which should you start first? This will depend on your debts as well as the relationship you have with your spouse.

    Sometimes one event affects another. Finances affect divorce. A bankruptcy puts a strain on the marriage. Get the help you need from Palm Beach divorce attorney Scott J. Stadler. While both processes can be complicated, he can make things easier. Call (954) 346-6464 today to schedule a consultation.