Many people associate bankruptcy filing with divorce. Planning can make your divorce and bankruptcy less complex and more affordable depending on where you live, which type of bankruptcy you wish to file, how much property you own, and how much debt you owe. Continue reading to discover which type of bankruptcy should be filed first for you.
Filing Together: A Joint Petition
Anyone, a married couple, or a business can file official bankruptcy paperwork to the court. This is when a bankruptcy case begins. For married couples filing together, a joint petition that contains both spouses’ financial information should be submitted.
- Divorcing couples often file jointly due to its efficiency. For instance, filing a joint petition can provide several advantages:
- Bankruptcy will erase (discharge), the qualifying debts of both spouses, reducing the number of issues that must be settled in divorce court.
Filing bankruptcy jointly is more cost-effective than filing separately, though married couples are not required to rub together. An individual filing may be better if one spouse needs immediate protection from debt. Divorce could make filing more manageable for one spouse since both have experienced a decrease in income; filing jointly could simplify the divorce process.
Bankruptcy and Divorce Costs
Filing fees for bankruptcy remain the same regardless of whether you file jointly or individually. Joint filings with your spouse can help save a lot of money in the long run; if you decide to hire a lawyer, each person filing a joint bankruptcy will have lower fees than if they filed individually. It is best to inform your bankruptcy attorney about your divorce beforehand as it could create a conflict of interest if they represent both of you simultaneously.
Filing bankruptcy before a divorce is an excellent way to simplify debt and property division matters, as well as lower your divorce expenses.
Chapter 7 Bankruptcy vs Chapter 13 Bankruptcy
Chapter 7 bankruptcy is a liquidation procedure designed to get rid of unsecured debts like credit card debt or medical bills. You typically get discharged in Chapter 7 bankruptcy within several months, making it possible to finish before the divorce occurs.
Chapter 13 bankruptcy, however, typically lasts three to five years due to the requirement of repaying some or all your debts through a repayment plan. If you’re thinking of filing for Chapter 13, it might be more efficient to do it individually as it requires more effort and time.
Filing for divorce will be simpler if both of you can pay off debt together through bankruptcy. Before filing a joint bankruptcy, make sure your state provides enough exemptions so that any property between the two of you remains intact. Some states even allow joint filers to increase their exemptions up to twofold! Therefore, filing joint bankruptcy might make more financial sense if you have a lot of assets.
If your exemptions aren’t doubled and you have more property that can be exempted in a joint bankruptcy, filing an individual filing may be preferable. Keep in mind, though, that bankruptcy filings made during divorce proceedings will result in an automatic stay which will prevent property division until after the bankruptcy proceedings have been concluded.
Discharging Marital Debt
Dividing marital debts during divorce proceedings can be both expensive and time-consuming. Furthermore, even if one spouse pays their portion of a debt, that does not change the obligations of the other toward that creditor.
Take, for instance, your ex-husband’s order in divorce to pay the joint credit card you shared. Even if he fails to fulfill this obligation or files bankruptcy, you would still be responsible and the creditor could pursue you. Even if he files for bankruptcy, however, your ex can reimburse you if you pay off the debt; even then his obligation of paying off creditors does not cease even if he discharges any obligations to you under his divorce decree.
However, attempting to collect from your ex may mean spending more money in court proceedings. It may be in both spouses’ best interests to declare bankruptcy and wipe away their combined debts before getting divorced.
Income Qualification for Chapter 7 Bankruptcy
Filings for Chapter 7 bankruptcy can be made either before or after divorce. If you have a single household, the decision to file can be made before or after your divorce. Joint filings require all income sources to be included in the bankruptcy; if this amount is too high or you fail the means testing process under Chapter 7, eligibility may not be granted.
Even if one spouse’s income is insufficient to qualify, filing for bankruptcy may still be possible. Chapter 7 income limits are determined by household size and a two-person household’s limit isn’t twice as high as one person’s limit; it’s typically slightly lower. Therefore, filing for bankruptcy may only be possible once each spouse has their household.
Need Help Filing for Bankruptcy?
If you’re facing mounting debt and the possibility of bankruptcy, it’s essential to seek legal guidance and protect your rights. At Bruner Wright P.A., our knowledgeable attorneys have successfully assisted countless clients to file for bankruptcy protection and regain control over their finances.
Services We Offer:
- CHAPTER 7 BANKRUPTCY
- CHAPTER 11 BANKRUPTCY
- CHAPTER 12 BANKRUPTCY
- CHAPTER 13 BANKRUPTCY
- BUSINESS BANKRUPTCY
- PERSONAL BANKRUPTCY
- BUSINESS LITIGATION
If you’re thinking about bankruptcy, don’t delay – contact Bruner Wright P.A. now to arrange a consultation. We will work with you to comprehend your individual financial situation and create a tailored strategy tailored for your requirements. Our team is passionate about helping our clients regain financial stability and control of their lives; we provide them with all of the guidance and support they need along the way. So if you’re ready to take control of your future finances, contact us now and let us help guide you toward it!