Bankruptcy and Divorce – When Should You File?

Filing for divorce is a stressful process and it can often happen during a time of great financial strain both individuals. This financial strain may cause both individuals to consider filing for bankruptcy. The big question is should you file before or after a divorce?
The first thing to understand is how bankruptcy and divorce can affect each other. Since distributing assets and liabilities occurs based on each individual’s income, a divorce cannot be finalized until after a bankruptcy is complete. Also, keep in mind that bankruptcy courts handle your filing based on your marital status. If you are still married, separated, or already divorced, it will affect your bankruptcy filing.
Filing Bankruptcy Before a Divorce
Filing for bankruptcy before a divorce has some benefits. If you and your spouse are on good terms, filing for bankruptcy before divorce can eliminate joint debt such as car loans and overdue mortgage payments. However, this really only applies if you both qualify for a Chapter 7. Chapter 7 also eliminates any unsecured debt which alleviates any debate of who will pay for any residual debt. A Chapter 7 attorney in Tampa can determine if Chapter 7 is right for both individuals involved.
Filing Bankruptcy After a Divorce
Filing for bankruptcy after a divorce helps if your joint income is too high to qualify for a Chapter 7. This could mean qualifying for Chapter 13 which requires a repayment plan. This is especially important if you or your spouse must pay spousal support. If you do not know the amount of spousal support you will pay, you will have insufficient income for both spousal payments and the repayment plan.
Contact us today to learn more about your options for filing bankruptcy and to receive your free case review.