Should I File Bankruptcy Before My Divorce?

Bankruptcy and divorce both deal primarily with your financial assets, so filing for divorce and bankruptcy at the same time may slow down the process for both filings. For example, your assets will become part of the bankruptcy estate upon filing bankruptcy, which may prevent a family court judge from distributing your assets. This means that your divorce may have to be put on hold until your bankruptcy is complete. Whether you should file bankruptcy or divorce depends on your specific situation.

Bankruptcy Before Divorce

It can be beneficial for both spouses to file bankruptcy before divorce if you have joint debt. Discharging joint debt before divorce can prevent having to determine how much of the marital debt each spouse will take. Joint debt can be tricky after a divorce. If your former spouse is court ordered to pay a debt, but fails to do so or files bankruptcy, that creditor can come after you regarding the joint debt. Your former spouse and co-debtor has to pay you back in these situations, but it can be expensive and time consuming to make this happen. So, it might save you a lot of stress if you complete your bankruptcy before filing for divorce. It is also usually cheaper to file a joint bankruptcy before a divorce because filing one joint bankruptcy is less expensive than filing two bankruptcies after the divorce.

Bankruptcy After Divorce

Filing bankruptcy after a divorce might be preferable in some cases. Some married couples have too much income to file a Chapter 7. Filing separately after a divorce may drop your income enough to make you eligible. If there are a lot of assets that will be divided in the divorce it may also make sense to allow the family law court to divide those assets before bankruptcy.

There are many things to take into consideration when you’re looking into bankruptcy. I’d be happy to help anyone in the Modesto or Stockton areas who need bankruptcy advise. Give our Stockton bankruptcy office a call to schedule a free consultation.