Bankruptcy Before Divorce?
Should I File Bankruptcy Before Or After I Am Divorced?
Divorce used to be four letter word. There was a social dishonor attached with the concept of divorce. With the divorce rate hovering around 50% for first time marriages, and even higher rates for second and third marriages, social acceptance of the process is more the norm. That being said, a change in a marital situation, changes in living circumstances and the financial hardships associated with bankruptcy create an extremely stressful set of life circumstances. Taking on these major life changes all at once should be the first concern for both parties before considering adding a bankruptcy to an existing stressful situation. Whether or not bankruptcy makes economic sense might be of little concern if it is the straw that breaks the camel’s back in terms of the sanity of either party.
Filing Bankruptcy Before Divorce Generally Makes the Most Sense
If both parties are secure and there is an amicable or reasonably amicable divorce on the horizon, then it boils down to overcoming another socially charged determination by both parties, whether or not to file for Bankruptcy.
In light of the “Great Recession” and the tremendous economic downturn, the stigma associated with filing bankruptcy has lessened substantially. Coming to terms with the economic realities of the times here in Florida (i.e. high unemployment and high rates of foreclosure), have sharply reduced critical opinion. Bankruptcy may be the only solution and the fresh start needed for couples going through a Divorce.
Determining whether to file for bankruptcy before divorce is dependent upon several factors and whether you are considering Chapter 7 or Chapter 13. Some of these factors are amount of debt, debt distribution, type of debt, timing, income, and assets. It is important to consult with a bankruptcy attorney to determine the appropriate legal strategy.
In general, filing for bankruptcy before filing for divorce may make the most sense. It would be an efficient means to rid the debt which would later be distributed between the parties and subject to the terms of a divorce. A chapter 7, if available, could liquidate the debt of both parties. This could simplify the divorce. It is, therefore, very important to consult with a Bankruptcy Lawyer.
The means test is also an important consideration if you are considering filing for Chapter 7 Bankruptcy. Whether or not a debtor(s) can file for chapter 7 is contingent on their income. If a debtor couple’s income is too great together, it may be more advantageous to file for bankruptcy separately.
Each situation is different. The only way to know what would be the most advantageous for you would be to consult with a Bankruptcy attorney first. If you live in Stuart, Port St. Lucie, Jupiter or West Palm Beach and have questions, please give my office a call.