Pros And Cons Of Filing For Bankruptcy Before Getting Divorced

Serious financial struggles can put a strain on a marriage. A couple may want to get divorced, but a large amount of debt can make this complicated. They may want to consult a lawyer and learn the pros and cons of filing bankruptcy before ending the marriage.

Types of Personal Bankruptcy Filings

A primary consideration for anyone thinking of declaring bankruptcy is whether to choose Chapter 7 or Chapter 13. Those are the two most common types of personal bankruptcy.

In Chapter 7, most or all of the debt is dissolved. If the individual who is filing has savings or other assets, there may be a requirement to use those assets to pay certain obligations.

Chapter 13 sets up a plan in which most or all of the money is paid back over a period of several years.

Potential Issues

The couple faces two potential conflicts with these filing options. Their combined income might be too high to qualify for Chapter 7. If so, they may not appreciate being tied together financially in a long-term repayment plan.

The two must be amicable enough to fairly divide their debt and use their assets. Feelings of hostility make working out an agreeable solution difficult.

For example, they may have a joint savings account. In Chapter 7, the court might require that that money be used to pay some of the debt. If one person has contributed significantly more money than the other, this can lead to hard feelings. That's especially true if the other spouse has been more irresponsible with credit cards. 

Advantages of Filing Before Divorce

There are some advantages to filing for bankruptcy before divorcing. If the couple qualifies for Chapter 7, one important advantage is dissolving the debt before the marriage ends. This allows them to have a fresh start immediately after splitting up. They won't begin their new lives with a mountain of debt holding them back.

Trying to divide debt during divorce proceedings can be contentious. If the couple cannot come to an agreement, they have to let a judge decide. This could leave both parties dissatisfied with the results.

Another benefit is the lower cost in legal fees because they will be able to hire a bankruptcy attorney together. Spouses who have filed for divorce cannot do this because it's a possible conflict of interest.

Getting Started

Bankruptcy attorneys generally offer free consultations in person and by phone. The attorney answers questions to help the couple decide how to proceed. Now, these two individuals can make an informed decision about their financial future. Contact a bankruptcy attorney to learn more.


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