Factors to Consider for Divorce during Bankruptcy

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Implications of Filing for Divorce during Chapter 7 Bankruptcy?

Financial stress and heavy debt can cause many problems in your life, including rocking your shaky relationship. It is therefore not uncommon to find that people who are in the process of bankruptcy also have marital discord resulting in divorce. Since married couples often have their finances entangled and their financial responsibilities complicated, a sign of financial trouble may cause a rift in many marriages. No matter what the reason behind marital discord and divorce, there are some points to consider when a bankruptcy filing and divorce are taking place simultaneously.

Sacramento based law firm Recovery Law Group has provided assistance to many individuals and couples with respect to personal as well as financial conditions. Most often the financial matters are discussed with spouses (since they are personal too), who might be considering or are amidst divorce proceedings. It is considerably important to discuss how bankruptcy might impact the divorce or vice versa depending on their unique situation.

In the case of Chapter 7 bankruptcy, also known as liquidation bankruptcy, the time taken for the process to complete is relatively shorter than that taken by Chapter 13 bankruptcy. Since the former can be filed and wrapped within a few months, couples considering divorce should consider the benefits of delaying the divorce process, filing jointly for bankruptcy to get more debts discharged and then beginning the divorce process. This way both the spouses can get a fresh financial start to begin their new lives.

Factors to Consider for Divorce during Bankruptcy:

Both bankruptcy and divorce can be life-changing. It is therefore important to keep the following factors in mind while contemplating divorce during bankruptcy proceedings:

Household Income: When you file for bankruptcy jointly, you can save money on not just the attorney fees but also filing fees. The downside of this is that your income when filing for jointly will be higher than that if you filed independently. If your income exceeds the qualifying limit for Chapter 7 bankruptcy, you both might not be able to file for it. In case this is your preferred chapter of filing for bankruptcy, you should wait till your divorce is finalized so as to qualify for Chapter 7.

Assets and Property: In case a couple decides to file jointly for bankruptcy before the divorce, they should consider the implications of this action on their property and assets. Sometimes, spouses may benefit due to double exemptions and able to protect more assets. It is important to ask a bankruptcy attorney considering your particular situation.

Honest relationship: Divorce can heavily impact any decision-making process regarding bankruptcy. In case you are able to effectively communicate with your partner, you can weigh in your options by discussing with your bankruptcy attorney and select the method which will result in maximum debt discharge. This way both parties can benefit from the bankruptcy and start afresh. However, if the relationship between the spouses is not conducive, things could be complicated. Thus depending on your relationship with your spouse, you can decide to defer the divorce after bankruptcy or go ahead with it sooner.

Divorce During Bankruptcy Process: If couples who had filed for bankruptcy jointly, decide to file for divorce mid-way of the proceedings, they have the option of separating their case. Since joint filing has 2 bankruptcies merged as one, couples contesting a divorce can always “deconsolidate” the bankruptcy, due to which each spouse can make an independent decision regarding how they can proceed with their case. However, it is not necessary that deconsolidating is the best alternative available. Consulting a bankruptcy lawyer would help develop a better insight on this issue.

Since every financial situations, as well as relationships, are unique, there is no specific set of rules that can give you magical results. Personal evaluation of the situation and weighing all possible options is essential before making any final decision. A qualified bankruptcy lawyer can explain all the options available for you with respect to bankruptcy and divorce. With all knowledge at hand, you can make a conscious decision to wait for divorce till after bankruptcy or go ahead with it before or during the bankruptcy proceedings.


2019-05-06T12:47:07+00:00