How a Bankruptcy will Affect Your Divorce in Arizona

Many people wonder whether they should file for bankruptcy before getting a divorce or after finalizing the proceedings. The answer to this depends on many factors. If you want to file bankruptcy in these circumstances, it is advisable to avail yourself of the legal services of an experienced bankruptcy attorney in order to be guided on the best bankruptcy options for your situation.

Bankruptcy and Married Couples in Arizona

Before discussing the effect of divorce proceedings on filing a bankruptcy petition, let us first talk about how the bankruptcy process affects married couples and their subsequent divorce.

In Arizona, if one spouse files for personal bankruptcy, the other one does not have to, unless they have joint debts. Bankruptcy filings also do not affect the spouses of the filers when it comes to the repayment of personal debt. Personal debt is not conjugal in nature. In addition, your decision to file for bankruptcy is not going to affect your partner’s credit report and rating. Every single person in Arizona has his or her independent credit rating, which means that personal debt is examined independently of the financial situation of a spouse. However, due to the bankruptcy, the bankrupt spouse may not be eligible as a co-guarantor of loans in the future – which means that one spouse’s bankruptcy may indirectly affect the other spouse. Whether you are filing under Bankruptcy Chapter 13 or Chapter 7, it is important that you seek the legal advice of an experienced Bankruptcy Attorney in Arizona.

Bankruptcy Filing amidst Divorce Proceedings in Arizona

While the marriage is legally intact, the two spouses can file for joint bankruptcy. Many individuals choose this option to deal with joint debt before the divorce is finalized.

Joint bankruptcy is more suitable for individuals looking to file a bankruptcy petition under Chapter 7 of the bankruptcy code. On the other hand, Chapter 13 bankruptcy comes with a debt repayment plan; consequently, recently divorced individuals with no substantial income find themselves overwhelmed in keeping up with their debt payment plan.

Keep in mind that non-exempt assets will be frozen when filing for joint bankruptcy before getting divorced. Only exempt property will be eligible for division between the spouses. The list of bankruptcy exemptions varies from state to state, so consult your bankruptcy law attorney regarding this matter.

If protecting your assets from debt collectors is what you both feel very important to do, you may file for joint bankruptcy before getting divorced. An experienced bankruptcy lawyer will tell you how to go about it. Talk to our bankruptcy lawyers in Phoenix if you find yourself at a loss on whether it is wise to proceed with bankruptcy before or after your divorce.

Some complications may arise if the petition for bankruptcy took place after the divorce has been finalized. Collection agencies can go after the former spouse who has not filed for bankruptcy protection, even if the couple is no longer together.

One of the worst steps to take is filing for bankruptcy in the middle of divorce proceedings. In most cases, filing for bankruptcy will put the divorce proceedings on hold and may only continue once the bankruptcy case is completed or if a divorce attorney files a motion to move forward with the legal separation.

Some Key Points to Note

  1. Alimony and child support get special protection under the bankruptcy law such that these are not exempt from the bankruptcy. In fact, these are the first of the unsecured debts to be paid among all your other unsecured creditors. Child support and alimony obligations are not dischargeable through either Chapter 7or 13 bankruptcies.
  2. Community debt acquired during the marriage becomes joint debt even after the divorce was finalized. The divorce will also lead to the apportioning of the debt between the two spouses. As such, the creditors may still go after the spouse who did not file for bankruptcy and demand debt payments. Therefore, it is advisable that two separate filings be done after the divorce to keep creditors from pursuing one of the spouses.

Filing for bankruptcy before, during, or after divorce each present different complications. A skilled bankruptcy attorney will be able to provide you with the best options after a thorough analysis of your circumstances. Free your mind of worry and confusion. Contact our experienced bankruptcy attorneys now for a free consultation.