If you're considering filing for bankruptcy while going through a divorce, it's important to understand all the options available to you. Filing for joint bankruptcy before divorcing could provide benefits that would not be available if each of you filed separately after or during your divorce proceedings. There can be complications involved in this approach, but understanding the overall process and potential advantages could help both parties achieve financial stability once they are divorced.
Read on to learn more about the potential benefits of filing joint bankruptcy before divorce.
The Two Primary Reasons to Consider a Joint Bankruptcy Filing
First and foremost, filing for joint bankruptcy can help couples with shared debt save money. As the cost of attorneys and fees associated with filing for bankruptcy can be substantial, joint filing can be an attractive option, allowing spouses to share the financial burden of filing. Couples can combine their finances and pay only one set of fees. When you’re facing significant debt, these cost savings can be highly beneficial.
Another benefit of filing jointly is that both parties receive the protection of a stop to creditor harassment. If only one party files separately, only they will receive creditor harassment protection. Meanwhile, creditors may turn their attention elsewhere and come after the other spouse for shared debts incurred during the marriage. Remember, creditors do not care about nor are required to acknowledge your divorce settlement. Filing jointly protects both spouses from creditor harassment during and after bankruptcy.
It is also worth mentioning that filing jointly may give couples greater flexibility in choosing the type of bankruptcy filing they will pursue. For example, there are some situations in which a couple together can qualify for Chapter 7 bankruptcy. While in contrast, if they were to file separately, they may only qualify for a Chapter 13 filing due to income requirements. For many, the option of Chapter 7 eligibility is very attractive and preferable.
When a Separate Filing Is Best
Typically, a joint filing is worth considering if the debt a couple is dealing with is shared debt acquired during the marriage. However, a separate filing may make the most sense if the debt is separate (in the name of only one party) and/or was acquired prior to the marriage or after the date of separation.
You should also consider filing separately if:
- You and your spouse struggle to communicate
- You are going through a particularly acrimonious divorce
- The spouse not filing for bankruptcy has significant assets that need protection from bankruptcy
- There is a considerable disparity between the debt situation of both parties
Filing for bankruptcy can be the lifeline people struggling with insurmountable debt need. However, it can complicate the divorce process and make it more difficult for some couples. If this is your situation, you should consider all your options before proceeding with a joint bankruptcy filing.
Reasons to Consider Waiting to File for Bankruptcy Post-Divorce
While there are many good reasons to file jointly, it is important to note that bankruptcy filing can dramatically slow down the overall process of your divorce. This can be frustrating for some couples who are anxious to move on with their lives. Not only does a bankruptcy filing put a stay on creditor collections, but it also puts a stay on your divorce proceedings while you wait for the bankruptcy court to process your case. You also must wait for the bankruptcy court to permit you to continue with your divorce while your bankruptcy case is pending.
If you are considering divorcing and filing for bankruptcy, consulting with qualified legal representation is highly recommended. At the Law Office of Greg Quimby, P.C., we have extensive experience helping divorcing couples deal with bankruptcy filing issues as well. Our familiarity with both processes enables us to help our clients make informed decisions as they work towards a better future for themselves and their families.
To discuss your situation with someone from our team, send us a message online. Our Colorado-Springs-based legal team is standing by.