Divorce And Bankruptcy

To begin with, the experience of couples filing for bankruptcy and a divorce at the same time has shown that it is not a good idea to do so. Both divorce and bankruptcy are complicated legal procedures, and filing together can cause a lot of stress to the parties. Additionally, depending on which Chapter is filed for in bankruptcy, the assets and debts can be tied up for the length of the bankruptcy proceedings, which will not allow the divorce to proceed. Delay in proceeding with the divorce is caused by the fact that until the bankruptcy is complete, there is no way of knowing which assets or which debts will be discharged and which will be retained. Thus equal or equitable (this designation depends on which state you live in), distribution of marital assets and liabilities or debts cannot be decided. Even if the couple wants to try to mediate a marital settlement agreement in mediation, that cannot be done if assets and liabilities are tied up in bankruptcy court.

Some legal professionals recommend the couple file bankruptcy before filing for a divorce. As finances, including distribution of or assets and debts, are a large part of divorce controversy, by filing for a Chapter 7  bankruptcy before filing for divorce, a portion of assets will be sold to help pay down debt, and most of a couple’s debt will be discharged. Both aspects of fewer assets and less debt will make a divorce settlement, whether by the mediation of a judge’s decision, a lot simpler. In essence, the bankruptcy court decides to eliminate non-exempt assets and debts, thus allowing the couple to move on with less financial burden and less heartache of who gets what marital property. For example, high-end electronics desired by both parties will be sold during bankruptcy. Too, the fear of having to pay another’s debts will, in most cases, be eliminated. When a Chapter 13 bankruptcy is filed, the assets are kept, and the debts are rearranged as to payment amounts, usually over a five-year period. Unless the couple gets along amicably, this arrangement usually doesn’t work well.

What about filing for bankruptcy following a divorce? Of course, this would have to be done by each party individually so the benefits would be lower and the cost higher.

When filing together before a divorce, the cost of bankruptcy is a single charge which can be split by the parties. However, following divorce, there will be the cost of two bankruptcies, and each party will have to pay their own costs. It won’t matter which Chapter is filed following a divorce as far as outcomes as each party will know what their assets and debts are and can decide which Chapter will work to his or her best advantage. Filing for either bankruptcy or divorce requires a lot of knowledge which usually is best obtained from a Family Law professional. While it is true hiring an attorney costs money, it is most likely that, in the end,  you will benefit financially to a greater degree than the cost of the attorney.

Related reading: The Benefits of Using Zero Subtotal Checkout in Magento Stores.

For additional background, see Wikipedia.

You may also find useful information from USA.gov.