Filing for bankruptcy is often a rough experience. Not so much the actual process, as that can be rather smooth when you work with an experienced bankruptcy attorney. It’s more so rough because of the emotions and feelings that it brings to the surface.
Of course, going through bankruptcy is a breeze compared to going through a divorce. The divorce process is always a difficult experience, even when both parties approach it cordially. So much of our identity and our hopes and dreams are often tied to our marriage, and this makes the experience a heavy one.
So what happens when you combine these two experiences and file for bankruptcy prior to filing for divorce? Today we’re going to look at the pros and cons of filing for bankruptcy prior to your divorce. With these listed out, we’ll have a better ability to determine whether or not it is a good idea to file prior bankruptcy before a divorce.
What Are the Pros of Filing for Bankruptcy Before Your Divorce?
While filing for bankruptcy before divorce may sound like a terrible experience, it doesn’t necessarily have to be. In fact, filing for bankruptcy prior to your divorce may have some decent pros that make it worth going through the trouble.
With that said, however, it’s important that you read the cons in the next section as well before coming to a decision on what is best for you.
Pros of filing for bankruptcy before your divorce include:
- Filing for bankruptcy before you get a divorce is often cheaper than each spouse filing individually after the fact, since most attorneys charge the same amount for an individual as they do for a married couple.
- Filing for bankruptcy prior to a divorce can make property division during the divorce easier.
- Diving debts often becomes easier when you file prior to a divorce since the married couple are able to discharge many debts that would otherwise need to be split during the divorce process.
- When you file a joint bankruptcy, you increase the exemption limit compared to when filing alone and this can allow each of you to retain important property like a car or house.
What Are the Cons of Filing for Bankruptcy Before Your Divorce?
There are just as many cons to filing for bankruptcy before your divorce as there are pros. However, many of the potential cons depend on how well the to-be-divorced couple get along and are able to work together. If things are cordial, some of these cons will be of lesser concern; though that doesn’t mean you shouldn’t consider how the experience might create additional tension between you and your spouse.
Cons of filing for bankruptcy before your divorce include:
- One of the biggest cons, and the one that most often cannot be overcome, is that this requires the couple to work together and if the relationship is heading for divorce then that might not be possible.
- If one spouse decides to file an individual bankruptcy prior to the divorce then this could leave the other spouse liable for all the debt; this is an underhanded tactic that often is done to spite an ex.
- Chapter 7 bankruptcy requires the passing of a means test, to determine whether you have too many assets; as a couple, it may not be possible to pass a means test and thus the only option available is a Chapter 13, which takes longer. Getting divorced first may make it easier to pass a Chapter 7 means test.
- While filing as a couple allows for higher exemptions, it is also possible that it won’t be enough to protect those assets you are most concerned about. Waiting until after property division is done as part of the divorce may allow you to use your exemptions on the property that matters the most to you.
- Filing for a Chapter 13 bankruptcy could delay a divorce by several years and this often isn’t feasible. Even if the divorce still leaves you unable to pass a Chapter 7 means test, you could proceed with a Chapter 13 bankruptcy without having to stay together with the ex.
Should You File for Bankruptcy Before Your Divorce?
There really is no easy answer to that question. As the pros and cons above show, there is a lot of good that can come out of filing before your divorce but there is also a lot of bad that could come.
Rather than try to argue that one is any better than the other, it is best to take a good hard look at your own circumstances to determine whether or not you should wait before filing for bankruptcy. There is a lot that you can figure out without the help of an attorney, such as whether or not you and your spouse get along well enough to wait for the bankruptcy to be finished before getting the divorce.
For those aspects that you are less sure of, such as whether you should file for Chapter 7 or Chapter 13 bankruptcy, or how exemptions work for a married couple, it is recommended that you speak to an experienced bankruptcy attorney for more information.
Should I Speak to a Bankruptcy Attorney or a Divorce Attorney?
If you are trying to decide whether or not to file for bankruptcy before your divorce, it is best to speak to both a bankruptcy attorney and an experienced divorce attorney. Both will be able to offer you valuable insights based on their experience and these will help you to ensure that the choice you make is the best one for your current situation.
Of course, if you feel like you and your spouse are not able to work together in order to go through the bankruptcy process then you’ll only need to speak to a divorce attorney. They can help you get the process moving so you can regain your freedom and pursue bankruptcy proceedings on your own terms.