Financial problems are one of the most common reasons for couples to get divorced. Wage garnishment, calls from collection agencies, and unpaid bills can pile up and cause friction between couples. 

If you’re in an unhappy marriage, you may have to consider bankruptcy filing or divorce procedures to settle your debt and your marriage issues. It is possible for both, although take note that these two legal processes interact with each other depending on your situation. In this article, we’ll discuss the general things that you need to know about both divorce and bankruptcy.

Whether you want to file for divorce or bankruptcy, you need the help of experienced lawyers. Our Phoenix bankruptcy lawyers are at your service! We’ve handled plenty of bankruptcy cases with divorcing couples. Call us now to schedule a consultation!

Bankruptcy Overview

Once you file for bankruptcy, the court orders an automatic stay. This prevents any efforts to collect the debt, such as collection calls or lawsuits. Once the bankruptcy process ends, certain types of debt get discharged, which removes any obligation to pay! 

There are plenty of factors to consider when deciding when to file. One of these is which bankruptcy chapter you plan to file for bankruptcy. People typically file for Chapter 7 or Chapter 13 bankruptcies. But which one is best for you?

Chapter 7

Chapter 7 is typically known as liquidation bankruptcy. Here a bankruptcy trustee liquidates your assets to pay off your debts. Only people with a low enough income can qualify for Chapter 7. After bankruptcy, your debts get discharged.

Filing Chapter 7 Before a Divorce

There are certain benefits from filing a Chapter 7 bankruptcy before a divorce. 

  • It makes property division between you and your ex much faster.
  • Prevent harassment from creditors. 
    • If your spouse decides to take on your debt to keep more assets but can discharge them later via bankruptcy, then the debt collectors might hound you for payment.
  • It’s much cheaper
    • The fee for filing bankruptcy is the same whether you do it yourself or jointly with your ex. Additionally, it’s much cheaper to pay for the bankruptcy courses together than to take them separately.

Filing Chapter 7 After a Divorce in Arizona

Divorce and BankruptcyA good reason to file after your divorce is that it’s much easier to qualify. The income limit under the US Bankruptcy code is very strict and the criteria may be easily met if you’re already single.  

You qualify for Chapter 7 via a Means Test, which combines a couple’s monthly income and accounts for expenses. However, if your monthly income is below the state median income, then you automatically qualify.

It’s usually difficult for married spouses who are both employed to qualify for Chapter 7. If you don’t have minor children, the limit is much lower and harder to achieve. However, if you divorce first, then your income counts separately, making it easier to qualify. 

If you’re considering bankruptcy, don’t figure it out alone. Talk to an experienced Phoenix bankruptcy lawyer to help you know whether you can qualify for Chapter 7 and what steps you can take to do so. 

Chapter 13

Chapter 13 is a reorganization bankruptcy. You propose a payment plan to the bankruptcy court which takes place over 3-5 years. This is typically for people who don’t qualify for Chapter 7 or who want to prevent foreclosure or repossession. People also file for Chapter 13 for debts that aren’t dischargeable, like student loans or tax debt.

If your marriage is already rocky, try to avoid filing for Chapter 13 before your divorce, especially if you qualify for Chapter 7 after. 

  • Your bankruptcy attorney might have to withdraw
    • Your attorney represents both you and your spouse under a Chapter 13 plan. If you divorce, your attorney may not be able to help any longer as they can’t represent clients with a conflict of interest.
  • Much more difficult to make payments. 
    • The repayment plan is based on your combined income. If you divorce, it will be hard for you to afford payments while paying for your daily expenses as Chapter 13 plans leave very little disposable income.

Put simply, it’s nearly impossible to continue with your Chapter 13 plan after a divorce. Consult with a skilled attorney first before deciding on your bankruptcy or terminating your marriage

What if Only One of Us Wants to File?

Filing for divorce

You can file for divorce unilaterally. In other words, one person can file for divorce even if the other party doesn’t want to. 

The petitioner will list their terms for the divorce. If the other person doesn’t respond, then the petitioner is granted a default order. 

Filing for bankruptcy

If your spouse doesn’t want to file for bankruptcy, then you can still go on with your Chapter 7 bankruptcy petition alone. Take note that the debts will be discharged under your name. While you’re married, your partner will be okay. But once you get divorced, they can expect to get calls from the debt collector. 

You cannot file for a Chapter 13 bankruptcy without the cooperation of your spouse. If you want to proceed with a reorganization, talk to your lawyer about the options available to you.

Hire a Phoenix Attorney Now!

It’s difficult to navigate through a divorce or bankruptcy without knowledge of the laws involved. If you’re thinking of filing for either, talking to an attorney can help enlighten you on the proper course of action to take!

Our bankruptcy attorneys at Phoenix Fresh Start want to do more than represent you. We want to give you a fresh start at a secure financial future! We understand that dealing with debt can be overwhelming, especially if you’re already going through a difficult marriage. We offer you a free consultation and a free credit repair service.

If you’re already struggling with all your debt, don’t wait another day. Call our Phoenix bankruptcy attorneys now to get a fresh start!