If you're between a rock and a hard place, the next steps might be hard to determine.
There are two big events in life that can certainly stress someone out: divorce and bankruptcy. But what happens when both happen at the same time? A lot; but with the right guidance and help, you can get through both situations and give yourself the chance to start over. Hiring the right law firm certainly helps, as experienced lawyers can give you the knowledge and advice to guide you through both legal issues.
Deciding Which Bankruptcy Type
One of the biggest decisions to make when filing for bankruptcy and divorce is deciding the type of bankruptcy you’d like to file. There are two common options for bankruptcy which you and your soon-to-be-ex must choose between: Chapter 7 or Chapter 13.
- Chapter 7. If you qualify for Chapter 7, filing before your divorce is generally the better option, as bankruptcy lawyers (Peoria, IL) relies on can explain. Chapter 7 bankruptcy filings can be completed in just a few months. There is no reason you and your spouse can’t file bankruptcy jointly, discharge all of your debts, and then continue on with the divorce.
- Chapter 13. If you must file for Chapter 13, you may want to wait until after your divorce. That’s because this type of bankruptcy process lasts from three to five years. If you are planning on divorcing within that time frame, you’ll need to go through the process of filing your bankruptcy cases separately, or closed altogether, once you have officially ended your marriage.
Your family income is another important factor to consider when you’re trying to decide if you should file for divorce or bankruptcy first.
- If you and your spouse file for joint bankruptcy, you will save money on the cost of hiring an attorney and subsequent filing fees.
- However, your combined family income determines what type of bankruptcy you file. If your income is too high for Chapter 7 bankruptcy, you may find that it is best to file bankruptcy after your divorce proceedings are finalized.
If you choose to file for bankruptcy before you divorce, you’ll want to sit down with an experienced attorney to determine how your assets can be protected in the event you file joint bankruptcy. This is especially important if you own joint property such as vehicles and your home. Depending on your jurisdiction, filing for joint bankruptcy could provide you some extra protection in the way of double exemptions. This is one aspect of facing divorce and bankruptcy where consulting with a legal expert is crucial.
Your Current Status
If you are on good terms with your spouse, you may realize that filing for bankruptcy before your divorce is a viable option. On the flip side, if you attempt to file bankruptcy with a spouse that you're not on good terms with, this could do much more harm than good. You need to depend on, and trust, your spouse to show up to court and provide all the necessary financial information and documentation. In addition, your spouse needs to work closely with you and your legal representative. When you're considering filing for bankruptcy about the same time as divorce, it's best to not overlook the status of your relationship.
No doubt that both of these major life challenges are difficult to navigate, so before you make any long term decisions, it's best to consult with a legal professional who can assist in making an informed decision.
Thanks to our friends and contributors from Smith & Weer, P.C. for their insight into bankruptcy and divorce.