The decision to file for bankruptcy and the preceding financial trouble can cause many issues on your emotional and physical well being.  For some the financial turmoil can lead to marital trouble and even divorce.  Should you find yourself in a situation where you intend to file for bankruptcy and a divorce, you need to be aware of the impact one can have on the other.

Divorce and bankruptcy Unfortunately, there is no code written in stone on which should come first divorce or bankruptcy, it truly depends on individual facts. A bankruptcy attorney can review all of your facts, including what type of bankruptcy you wish to file and how you plan on dissolving your marriage or partnership.

In the initial planning stages, one of the most important deciding factors is whether or not your spouse or partner will be amenable to your divorce and your plan of action on dividing the debts and assets.  If you fear your spouse or partner will want to litigate your divorce you will need to reach out to an additional attorney for family law guidance.  It will be essential for your family law attorney and bankruptcy attorney to communicate to ensure the timely and efficient handling of your divorce and bankruptcy.

Once that issue has been addressed, the two main issues will help your counsel properly advise you.

  • How will you divide your debts and assets?
  • Will you be filling for bankruptcy jointly or alone?

Your divorce decree will determine how marital assets, such as real property, personal property, or investment accounts will be divided amongst you.  Additionally, the divorce decree will indicate which spouse is responsible for the joint debt incurred during the marriage. Finally, your divorce decree will also state if one spouse will pay the other spouse support payments.

Next you will need to discuss how you will be filing for bankruptcy protection. Will you file bankruptcy as a couple or separately?  Many people find the answer to this question, truly depends on the type of bankruptcy you are planning to file for.

If you are planning to file Chapter 7 bankruptcy, it may be prudent to file together.  The reason being, is that Chapter 7 bankruptcy can be completed on a shortened timescale. With Chapter 7 both partners can file for bankruptcy protection, discharge the various debts together and then precede with the divorce proceedings.  A typical Chapter 7 bankruptcy is concluded within 6 months while a divorce in California can take up to 12 months for a simple divorce because of the current Court backlogs.

However, if you are planning to file under Chapter 13, you might find it better to file for divorce first.  As Chapter 13 bankruptcy is a more complicated proceeding with associated payment deadlines, it can take anywhere from three to five years to complete.   If you decide to file Chapter 13 and find the need to file for divorce during that process you will need to have the bankruptcy action separated or closed and reopened before the marriage can be officially entered.

Divorce and bankruptcy are both complicated situations to find yourself in. Should you find yourself in such a situation, do your research and reach out to both a qualified bankruptcy attorney and a family law specialist to ensure your best interests are met.

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