Should You File for Bankruptcy or Divorce First?
If you are considering filing for both bankruptcy and divorce, it’s important to carefully consider the timing of these filings.
As a general rule, bankruptcy will take precedence over a divorce. If you file for bankruptcy while going through a divorce, there’s a chance it could delay the distribution of your marital assets and debts until the bankruptcy process is complete, so you can’t really get through both at the same time.
The question then becomes which you file first, and the answer varies from case to case.
When it makes sense to file bankruptcy first
If you and your spouse have a good relationship, it may make sense for you to file for bankruptcy first, and to do so jointly. This allows all of your marital debts to be addressed together in a single case, and can help you wipe out joint debts while also increasing your exemption limits. This is especially beneficial if one spouse earns a majority of your income, because you’ll be more likely to qualify for Chapter 7 bankruptcy, in which you can get more of your debts completely discharged.
You’ll want to avoid Chapter 13 bankruptcy if you plan to get a divorce, because it places responsibility for the repayment plan on both of your shoulders, and will prevent you from dividing assets by sale.
When it makes sense to file for divorce first
If your income as a combined couple is too much to qualify for Chapter 7 bankruptcy, then it makes sense to file for divorce first, after which you may be able to qualify for Chapter 7 bankruptcy under your new financial circumstances.
In addition, divorcing first can allow you to know how much money you’ll owe in child support or alimony before filing for bankruptcy, which will affect how your case proceeds.
To learn more about this important issue, speak with a skilled Long Island family law attorney at Bryan L. Salamone & Associates.