Bankruptcy and divorce are two of the most challenging and emotionally draining things a person can go through, and coping with them all at once can be stressful. It is difficult to get through bankruptcy and divorce, but with a good approach (as well as good faith from both partners), it is possible to have a fresh start and rebuild a stable financial future in a matter of years.
Is it a good idea to file a bankruptcy petition before divorce?
When you start the divorce and bankruptcy process, keep in mind that the two proceedings are unlikely to happen at the same time. Yes, judicial motions may be brought simultaneously. However, in most jurisdictions, one case would take priority over the other. If both proceedings are occurring at the same time, bankruptcy is normally placed on hold until the divorce court splits the marital debts and properties between the parties.
Handling the two legal proceedings would just add to the complexity of your case, but for the sake of convenience, you should consider filing a petition for divorce before filing bankruptcy. However, in some cases, it might be preferable to file for bankruptcy first and then deal with the divorce proceeding.
An individual’s financial condition and state law will decide the correct order in which to manage divorce and bankruptcy. Before filing bankruptcy, you should understand the basics of bankruptcy laws, the right process on how to file, and the qualifications for you to file a bankruptcy petition. In this case, consulting a Phoenix bankruptcy lawyer and a divorce lawyer is important before filing a petition. Before beginning any procedure, seeking legal help is advisable for you to decide which is the best option for you.
Filing a petition for bankruptcy before getting a divorce
There are benefits of going through a divorce before filing bankruptcy and vice versa. The right to discharge joint marital debts (that would otherwise have to be split as part of the divorce procedure and then dealt with individually in each partner’s bankruptcy) is a significant benefit of bankruptcy filing before going through a divorce. A joint filing for bankruptcy necessitates compromise between the partners, but it can greatly speed up the divorce proceeding and save both parties money and time. A couple filing for a petition in bankruptcy after getting divorced will retain a greater portion of their properties than if they filed for bankruptcy separately.
Filing divorce petition before a bankruptcy filing
A common reason to file for divorce before bankruptcy is to satisfy the Chapter 7 bankruptcy requirements. In comparison to bankruptcy Chapter 13, which excludes some types of debt but allows creditors to negotiate a repayment plan, bankruptcy Chapter 7 eliminates all qualified debts. For you to be eligible to file bankruptcy under Chapter 7, your monthly income should be less than the median income in your state. Depending on the circumstance (for example, one spouse earns the majority of the income), getting divorced before a bankruptcy filing can allow both parties to be eligible for bankruptcy under Chapter 7.
After the divorce process, what will happen to your credit score?
Whether you want to file for bankruptcy or divorce first, it is important to understand that neither method can fully separate the assets from your would-be former spouse or partner. In the case of marital debt, for instance, a bankruptcy Chapter 13 payment plan can make both parties legally liable for debt repayment. There are certain types of debts that are not dischargeable. Non-dischargeable debts include child support, alimony, tax debt, student loan debt, and secured debt. Whether you or your partner cosigned to one of these loans, you will be equally liable for ensuring that these debts are being paid even after the bankruptcy and divorce process.
It is not easy to deal with divorce issues and bankruptcy at the same time. Before you prepare all the needed bankruptcy and divorce paperwork, it is important to understand each proceeding. Seeking help from divorce attorneys and consulting a credible and experienced Phoenix bankruptcy lawyer will be beneficial for you to have a successful filing of the petition.
Bankruptcy filings have significant, long-term implications for people’s credit ratings and their ability to access credit cards or loans. Although divorce does not directly affect your credit score, the outcome of a divorce proceeding may lead to circumstances that do. The different types of bankruptcy will depend on your specific bankruptcy case and circumstances. Experienced bankruptcy attorneys can help you decide on which bankruptcy option is the right one for you.
Have a fresh start and rebuild your financial future. Call our Phoenix bankruptcy lawyer at Phoenix Fresh Start for a free consultation.