Did you know that someone gets divorced every 10 to 13 seconds in the U.S.? Some of those divorces occur in couples who are also contemplating filing for bankruptcy. What should they do? File or divorce first, or proceed with bankruptcy?
Despite how difficult if may be for an unhappy couple to stay together and live in the same home, in most, but not all, cases it's best to file for bankruptcy first and complete that process before initiating divorce proceedings.
Chapter 7 vs. Chapter 13
To help you understand the differences between Chapter 7 and Chapter 13 bankruptcy filings, here are some explanations:
Chapter 7 Bankruptcy: Also known as liquidation bankruptcy, Chapter 7 allows for the discharge of unsecured debts including credit cards, medical bills and personal loans. In the average case, a person is usually able to exempt all their personal property. The Chapter 7 process can be completed in as little as 90 days, allowing you to begin rebuilding your financial standing and proceeding to the next phase, your divorce.
Chapter 13 bankruptcy: The Chapter 13 process allows you to create an affordable payment plan that gives you the chance to catch up on past due debts. The payment plan, lasting three to five years, gives you the opportunity to pay off lowered settlement amounts to your debtors and discharge your remaining debt once the plan is complete.
Benefits of Filing for Bankruptcy First
Although it is tempting to file for divorce first, it's important first to wipe out your debts together. This will simplify the division of property later on when you file for divorce.
Discharging Credit Card Debt
Let's say that you and your spouse have significant debt. If you were to proceed with the divorce first, you might find it difficult to impossible to get your spouse to stick to the agreed payment plan and pay his or her fair share of that debt.
However, if you file for bankruptcy first, then you won't be burdened with trying to make your spouse commit to the payment plan for obligations you jointly owe to a creditor. Not even a divorce decree can ensure your spouse will follow through on agreements he or she made.
Another reason to file for bankruptcy first, if you can, is that litigating which debts are owed by which spouse will make your divorce more expensive.
In most cases, but not all cases, the best course is to file for bankruptcy first and then file for divorce. However, if you have further questions, please call me.
Our staff offers bankruptcy litigation guidance to creditors and lenders interested in protecting their accounts from discharge during a debtor's bankruptcy proceeding. We also defend creditor litigation against the debtor.
Please contact our office at 707-623-1875 to schedule a free consultation with to discuss your financial worries with our lawyer and to learn if the bankruptcy process is right for you.