Divorce and bankruptcy share a few things in common. They are both legal proceedings, and they both involve changes to one’s personal assets and finances. Plus, financial difficulties are always the cause for bankruptcy and frequently the cause for divorce. However, while it’s technically possible to file for bankruptcy while you’re going through a divorce, it’s not a good idea.
Why You Shouldn’t File for Bankruptcy During Divorce
As soon as you file for bankruptcy, the court puts an automatic stay into effect. The automatic stay will prevent creditors from attempting to collect on your debts, and it may also trigger the freezing of some assets. Since divorce requires the court to access and divide your assets, the automatic stay will halt the divorce. This causes the divorce to drag on far longer than it needs to.
When to File for Bankruptcy First
Not every divorce is highly contentious. If you and your spouse are going through an amicable split, the two of you might decide to file for bankruptcy first before dealing with the divorce. Married bankruptcy petitioners may be able to use a double exemption to preserve more of the assets. Note that filing for Chapter 13 requires a three-to five-year repayment plan. Because of this, you may wish to file for Chapter 7 so that you can obtain a discharge sooner and file for divorce more quickly.
When to File for Divorce First
If you do decide to file for Chapter 7 bankruptcy, you may not meet the income requirements of the means test if you’re still married and filing jointly. You could decide to file for Chapter 13 instead, but then you would have to wait a long time before filing for divorce. If you prefer to file for Chapter 7 as a single filer, it may make more sense to wrap up the divorce first before going to bankruptcy court.
The seasoned bankruptcy lawyers at Cutler & Associates, Ltd. look forward to meeting you and answering all of your questions about filing for bankruptcy. Each of our clients receives personalized guidance and attentive service because we firmly believe in helping you achieve long-term stability. Call (847) 961-4572 to request a consult at one of our law offices in the Chicagoland area.