Debt problems often lead to divorce which in turn can lead to bankruptcy. Studies have shown that the biggest single stressor on a marriage is debt and money issues.
You may have many other reasons to seek divorce, and the reasons often overlap. You may not “want” to save the marriage. But anytime eliminating debts can alleviate any type of stress, the bankruptcy laws are there to help you.
You may wonder “which should I do first?”
There is no single simple answer every time. I’ve filed bankruptcies for one or both people in a marriage, where they’ve been separated for years, and haven’t ever really felt the need to actually get divorced. However, I file most cases for people soon “after” divorce. If there were two incomes for one household, and now there is just one, adjustments to budgets must be made. You can try to cut back on some expenses, but you may need a bigger “tool from the toolbox” to reduce expenses. Specifically, the ones relating to old debts.
Items to consider in “which should come first”
Assets
Divorce divides assets. Sometimes it’s better to file while married, and get double the allowance of property you’re allowed to keep. Sometimes it’s better to file after divorce, especially if your spouse will be getting assets. That way, those assets won’t be given up in a bankruptcy.
Debts
Some debts just can’t be divided. You may want to do so, and the divorce judge may approve and order that one of you pay certain debts. But remember that the debt holder isn’t a party to the divorce, and can try to collect against whoever “signed on the dotted line,” regardless of what the Judge’s order says.
Another very important consideration: If you are ordered to pay what was a joint debt, or a debt of your ex-spouse, you cannot discharge that obligation with a Chapter 7 Bankruptcy. While negotiating, do not make an agreement to pay debts that are not solely in your name. There’s often no point in arguing about who has to pay the debts if Bankruptcy is on the horizon anyway (there may be other, more important things to argue about or agree on).
Filing jointly with your soon-to-be ex-spouse?
You may both benefit from this and save money at the same time. One joint case usually costs about the same as an individual case. If you’re both going to file anyway, but file separately or after a divorce, it can cost twice as much.
Of course, this takes an agreement by both of you to do this, and the ability to work together a little bit to make sure your papers are correct, though you may only need to sit together for a few minutes for the whole case.
My specialty is bankruptcy and debt issues (not divorce). To find out more about how and when bankruptcy might be appropriate, follow this link: Peter Blinn
For over 35 years, listening to clients and putting them at ease, while finding solutions and helping achieve future goals, in Marion County, Lake County. Citrus County, Sumter County, and The Villages.
