Divorce and Bankruptcy: The Double Whammy
Divorce can often be a major contributor of financial stress. From child support and alimony to division of assets and debts, divorce can be the primary reason people file for bankruptcy. In this article, we’ll take a look at how divorce impacts bankruptcy.
Types of Bankruptcy
Before we get too deep into the weeds, it’s important to talk about the two basic types of bankruptcy for individuals, and how each impacts your divorce.
Chapter 7 Bankruptcy
A rather quick liquidation of unsecured debt (credit cards, bills, etc.) that takes about 90 days from start to finish, and you and your spouse can file jointly. Eliminating your debts jointly can grease the wheels when it comes to the property division portion of your divorce.
Chapter 13 Bankruptcy
A much longer process – typically lasting from three to five years – because you are able to restructure your debt into monthly payments. For this option, you will file separately, and will probably want to do so after the divorce is finalized. Two things to keep in mind:
- If you file for bankruptcy during an ongoing divorce, the court will implement an automatic stay – or hold – on the division of property process of your divorce.
- Being on good terms with your spouse will be especially helpful during this time. Remember, you’re going to need them to provide necessary financial information as well as appear in court and work with you and your attorney.
- Your income plays an important role when bankruptcy and divorce are at the threshold. While filing jointly with your spouse will save on legal fees, etc., both of your incomes will be examined. If the incomes are deemed too high, you may not qualify for Chapter 7 bankruptcy.If you earn less than your spouse, you may want to wait until after the divorce is finalized before filing for Chapter 7 bankruptcy. In fact, both of you may fare better by waiting until after the divorce to file Chapter 7 individually.
Statewide Bankruptcy Can Clear The Air
If you’re facing divorce and bankruptcy, chances are better than average that you’re emotions are running high. You need the expertise of a skilled attorney who knows the entire bankruptcy process so that you can be better informed and positioned to make the best decisions. We encourage you to contact the offices of Statewide Bankruptcy today by calling (602) 225-2222.