Bankruptcy is a complex process, exacerbated even further when it comes to divorce. Whether filing for bankruptcy together or separately during divorce, the action requires careful consideration and thorough discussions. Timely filing can provide debt relief soon after the divorce is finalized and may help navigate post-divorce debts down the road.
The bankruptcy attorneys at Licata Bankruptcy Firm break down what steps you should consider during these processes.
Which Bankruptcy Chapter Should We File During a Divorce?
When considering filing for bankruptcy and divorce, it is essential first to consider which chapter of bankruptcy should be filed. In most cases, it's wise to seek legal advice about filing for bankruptcy before filing for divorce. This is because debts are generally handled differently in a divorce setting and can sometimes interfere with the outcome of the bankruptcy process if not addressed beforehand.
Additionally, the choice of Chapter 7 or Chapter 13 can sometimes depend on each person's particular financial situation, which a qualified legal professional would best evaluate. It's also important to note that certain debts are reduced or eliminated entirely when filing either chapter. Understanding these choices may help you make an informed decision regarding these major life changes.
How Debts are Divided in a Divorce and Bankruptcy
When dividing debts in a divorce or bankruptcy, one of the most important factors is the type of debt. When deciding who is responsible for what, a court may consider whether a debt is marital or non-marital. Generally speaking, in many marriages, each spouse will be held accountable for their own separate debts and any joint debts taken out during the marriage. On the other hand, if a debt was acquired by just one spouse before the marriage or appeared on only one partner's credit report, then that individual will be required to make payments and take responsibility for repayment.
In bankruptcy cases, it usually depends on which form of bankruptcy is used; Chapter 7 or Chapter 13. With Chapter 7 bankruptcy, all outstanding debts are discharged. With Chapter 13, a payment plan must be put in place to pay off creditors over time, generally five years but up to seven. The important thing is to understand how these laws apply to your situation so that you can make wise choices that best suit your needs and goals.
Bankruptcy Myths During Divorce
During divorce proceedings, individuals may worry about ending up bankrupt after the process is over. However, lingering bankruptcy myths could cause them to feel intimidated and make decisions that could lead to financial hardship. It's important for divorcing couples to remember there's no such thing as being made automatically bankrupt, whether due to a divorce judgment or other legal action. Bankruptcy might be a part of the process, but it doesn't have to be. Careful planning and working with advisors are crucial to ensuring financial security during and after a divorce.
How Licata Bankruptcy Firm Can Help During Bankruptcy and Divorce
Bankruptcy and divorce are not the paths anyone typically wishes to take, but in some cases, it is an inevitability. Bankruptcy serves as a fresh financial start, allowing individuals to work their way out of debt and regain control of their financial future. Divorce can be just as beneficial, although the emotional cost may be high. When considering bankruptcy and divorce, you should view it positively as a stepping-stone towards stability and security for you and your soon-to-be ex.
Licata Bankruptcy Firm is here for you when you're ready to begin the bankruptcy process. Our team will determine which chapter of bankruptcy or bankruptcy alternative is best for your situation. Set up a free consultation with our team by reaching out online or by phone. (417) 213-5006