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Should I File for Bankruptcy Before or After Divorce?

What Bankruptcy Choices Do Divorcing Couples Have?

Deciding to divorce is never easy, and when financial difficulties such as credit card debt and mortgage troubles are added to the mix, it can make the situation much more challenging. The good news is that bankruptcy is a viable option that can help divorcing couples relieve debt, but the big question is, “Should I file for bankruptcy before or after divorce?” While there are a few factors that need to be considered, we have some answers to help you make the decision that is best for you and your specific financial situation.

The Benefits of Filing Before Divorce

Even if you are married, you always have the option to file for bankruptcy as an individual. However, filing together before getting divorced can make the process go smoother. Filing a joint bankruptcy petition has the following advantages:

  • Discharge marital debt: The bankruptcy will wipe out qualifying debt for both spouses. This can reduce the issues of dividing debt as part of your divorce proceedings and then filing for bankruptcy on your own after the divorce.
  • Save on bankruptcy and divorce costs: Bankruptcy filing fees are typically the same for joint and individual filings, so filing for bankruptcy before a divorce can help save money on legal fees. Additionally, the less your divorce attorney has to work on, the less money you’ll have to pay them, so taking care of property division and debt before you end your marriage can help mitigate divorce costs.

Chapter 7 vs. Chapter 13

Whether you decide to file for bankruptcy before or after divorce, you and your soon-to-be ex-spouse must be on the same page in understanding the different bankruptcy options you may be eligible for. The following are the most common bankruptcy options for divorcing couples.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, also known as “straight” or “liquidation” bankruptcy, can help clear many unsecured debt types. The most common types of dischargeable debts in Chapter 7 bankruptcy are:

  • Credit card debt
  • Medical debt
  • Personal loans
  • Payday advances
  • Utility debt
  • Back rent

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is an option for those who have an income too high to file for Chapter 7 bankruptcy. The benefits of Chapter 13 include:

  • Save your home from foreclosure
  • Protect assets or property that would otherwise be included in Chapter 7
  • Repayment of certain (not all)tax debts or other debt through an affordable payment plan

Types of Debts Not Eligible for Bankruptcy

It’s critical to understand that not all types of tax debts can be included in bankruptcy. Here are some other types of debts that are not eligible for bankruptcy:

  • Child support or alimony
  • Student loan debt
  • Government penalties or fines
  • Personal injury debts (such as a drunk driving accident)
  • Criminal restitution
  • Court fines and penalties

The “Means Test” and Bankruptcy

To learn if you are eligible for either chapter, you’ll be required to take the “means test.” The means test measures your disposable income and how much you can pay towards your creditors after factoring in all of your monthly expenses. The “means test” is a complicated process, so having an experienced bankruptcy lawyer in your corner to assist you can make all the difference.

Considering Bankruptcy? Licata Bankruptcy Firm Can Help.

Filing for bankruptcy isn’t a light decision to make. When mounting debt becomes overwhelming and you are not sure how to rectify your financial situation, your decision becomes that much more stressful to deal with. Know that you are not alone, and our team of experienced bankruptcy lawyers is here to answer your questions and ease your concerns.

You don’t have to live with crushing debt. At Licata Bankruptcy Firm, our mission is to help individuals, families, and businesses get the financial relief they need through bankruptcy. You can expect us to give you the one-on-one personalized attention that you deserve. Know that you are not alone, and we’ll support and guide you through every step of the bankruptcy process.

To learn more about your options, contact our Springfield bankruptcy attorneys at (417) 213-5006 today.