Bankruptcy and Divorce

Considering divorce and bankruptcy at the same time can be extremely stressful and confusing for all parties involved.  Often, individuals wonder what the best option is for them when considering bankruptcy and divorce.  Depending on the debt involved, the type of bankruptcy that is filed, and the circumstances it could be better to proceed with the divorce before you file, or sometimes even after.  The order of events does have an effect on the options that are available.

A joint bankruptcy petition can be filed if the two parties are still legally married, regardless of if there is a divorce looming in the future or not.  Even if a couple has been separated for years, if they are still legally married, they can still file the petition jointly.  While you may wonder why a couple would want to file a bankruptcy together when they are planning to file for divorce soon thereafter, it often times makes very good sense.   A joint bankruptcy filing would mean that there are one set of attorney fees, one set of court costs, and one set of any other fees that may be incurred; you can end up saving a substantial amount of money.   A joint bankruptcy filing prior to filing for divorce will also resolve several issues that can arise in a divorce proceeding, which is also another potential way that you could save money in attorney fees during the divorce.   If the bankruptcy wipes out all of the unsecured debt that you currently share, there is typically a lot less to settle and assign out in the divorce.   Discharging the debt prior to the divorce can allow both individuals to move forward from the bankruptcy and the divorce with a true fresh start.

While it is sometimes in your best interest to file for bankruptcy prior to filing for divorce, it is also sometimes not in your best interest.  There are some instances when it is not recommended to file a joint bankruptcy petition when there is an impending divorce.  One of the main instances that filing a joint bankruptcy prior to a divorce would not be recommended is during a Chapter 13 bankruptcy.   A Chapter 13 bankruptcy can last anywhere from 3 years to 5 years.  Given the extensive amount of time that you will be in this type of bankruptcy together, often times individuals have to remain in contact and rely on one another to hold up their end of the filing as far as making plan payments and following all of the requirements of a Chapter 13.  Even though you can file a Chapter 13 together, this is not typically recommended and may not even be desirable for certain individuals, especially if the relationship is not very civil.   Another reason to avoid filing a bankruptcy jointly and to wait until a divorce is finalized to file a bankruptcy petition singly directly relates to income and assets.  If you file jointly with a spouse, all income and assets need to be listed on the petition, which could lead to issues with eligibility to file a Chapter 7 bankruptcy.  However, if you are already legally divorced, your bankruptcy filing would only include your income and assets, which may be in your best interest.

Deciding to file for bankruptcy and divorce at the same time is a complex process.  If you are unsure of what your best option would be, contact a St. Louis Bankruptcy attorney today!

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