Marital problems and money problems often go hand in hand. When a married couple decides to separate and realizes that the best way to handle their financial issues is to file for bankruptcy, it can be confusing to determine which should come first — the divorce or bankruptcy.
Benefits of Filing for Bankruptcy First
There are numerous benefits to filing for bankruptcy while you and your spouse are still married. To begin with, the cost to file for bankruptcy as an individual is the same as the cost for filing joint bankruptcy. If you and your spouse each file for bankruptcy individually, you will each be responsible for your own bankruptcy costs. There’s a potential to save significantly on court costs if you file your bankruptcy before you and your spouse separate.
Additionally, filing for bankruptcy before you get a divorce can help simplify your debts. This is helpful when it comes to dividing assets during the divorce, since debts are divided equally. If you file for a Chapter 7 bankruptcy and have many of your debts discharged, you will have few — if any — debts that are divided during the divorce.
The Cons of Filing for Bankruptcy First
If you file for joint bankruptcy, both you and your spouse will have the same bankruptcy lawyer. This can potentially be an issue as you move into a divorce, because then it would become a conflict of interest for your bankruptcy lawyer to continue to represent you both. It’s important to discuss your situation with your bankruptcy attorney from the start of your case.
If you file for a joint bankruptcy and wish to file for a Chapter 7, you must file your combined income. In some cases, it is too high to qualify for a Chapter 7, especially if both spouses work, and this scenario would require the couple to file for a Chapter 13 bankruptcy. However, if you and your spouse divorce and then file bankruptcy afterwards, there may be enough of an income reduction that you can each file for a Chapter 7.
Contact Ted Williams Jr. Today
If you are considering filing for bankruptcy and getting a divorce, it’s critical to speak with an attorney who is proficient and understands the laws in both areas. Contact the Law Firm of Ted Williams, Jr. to discuss your unique needs and find out more about how you can proceed. Call today for a consultation at (205) 623-4443.