A dispute over finances is one of the most common reasons for couples to divorce. Sometimes those bitter disagreements are based on uncontrolled credit card debt or reckless spending on luxury items. Each divorce’s circumstances are different, but the couple eventually realizes that they have out of control debt and a broken marriage. Now it is time to make some hard decisions.
One will affect the other
Before filing for divorce or bankruptcy, it is wise to consider how one issue will affect the other. Points to consider include:
- The order: Typically, it is best to file bankruptcy first because it will put an automatic stay on creditors and freezes assets and property.
- Separately or jointly: It may make sense to file bankruptcy jointly to better protect certain assets that are exempt.
- Chapter 7 may be the best option: This enables the two-pronged process to be over more quickly because more of the assets are liquidated, and the debt will be discharged in as little as 90 days. Chapter 13 is a financial restructuring that lasts for three to five years, which could drag out the divorce.
- Non-dischargeable debts: Bankruptcy does not forgive all debts, so the list of remaining obligations will have a bearing on the divorce and who will pay.
One attorney shouldn’t handle both
Some lawyers handle a little of everything, but it makes more sense to work with a bankruptcy law attorney and family attorney. It is not unusual for couples to file for both bankruptcy and divorce, so the lawyers can provide helpful insights for making these critical decisions during this difficult time.
