Are you looking for debt relief before handling your marital affairs? Check out our guide to everything you need to know about filing before a divorce.
In 2020, the courts received 544,463 bankruptcy filings. While that number was down from the year before, that’s still a lot of bankruptcy cases.
People turn to bankruptcy for debt relief purposes, and there are many events and situations that lead to extreme financial issues.
One event is divorce. If you are preparing for a divorce, you might want to consider filing for bankruptcy before going through with the divorce.
Here is a guide to help you learn more about bankruptcy before a divorce.
Why Divorce Leads to Financial Problems
When a married couple decides to divorce, they often experience financial issues.
The financial issues they suffer from splitting up might occur from the break-up, or they might be an escalation of the financial issues they already have. This may occur for several reasons.
The main reason for financial problems as a result of a divorce is the splitting-up of one household into two. Paying bills for one household is costly, but paying bills for two is even worse.
Additionally, many couples end up divorcing because they have money issues. Financial problems often lead to divorce. That’s because when a couple fights over money often, it can create a lot of tension in the marriage.
If the couple doesn’t seek help or work through the issues in a healthy way, it could lead them to divorce. And financial issues often worsen after splitting up.
Many couples turn to financial advisors and lawyers for help with their debt problems. Bankruptcy is one form of debt relief, but there are other options. You can talk with experts to learn more about your options.
If you decide to file bankruptcy, you may want to find out if it’s better to file before or after your divorce, as there are some differences.
Benefits of Filing Before You Divorce
If you’re heading toward bankruptcy, you might want to determine if filing before your divorce is better than filing after it. There are times when couples should file before they go through their divorce.
One benefit of filing first is that you can file a joint bankruptcy case. If you both want to file, filing jointly helps you save money. You pay just one filing fee when filing jointly.
If you both file after the divorce, you would have to file two cases. Filing two cases requires paying two separate sets of legal fees.
The second benefit of filing jointly is that you eliminate one person from getting stuck with debt. If you file together, every debt that you both have becomes part of the bankruptcy case.
You can file for bankruptcy individually before you get divorced, but you’ll need to learn the bankruptcy laws for this situation. If you file alone and have joint debts, your spouse becomes responsible for the debts if you file.
When a couple has complex debts, such as tax debt, talking to a bankruptcy lawyer is often helpful to learn more about the options.
Benefits of Filing After You Divorce
Some couples benefit from filing for bankruptcy after the divorce. Choosing when to file often depends on the branch you use in your bankruptcy case.
For example, Chapter 7 and divorce works well when both individuals want to file before the divorce. Chapter 7 is a cut-and-dried type of bankruptcy case that doesn’t take a lot of time.
The downside to filing for Chapter 7 before your divorce is that you might not qualify as a couple. To qualify, a lawyer compares your total household income to the average in the state.
If you and your spouse earn too much money combined, you wouldn’t qualify for Chapter 7. If you wait to file until after the divorce, both spouses might qualify, as they only have to report their own incomes.
Chapter 13 and divorce works differently. A Chapter 13 case takes three to five years, so it’s not the best option to use before your divorce. Instead, it works well after a divorce.
You can discuss your unique situation with a bankruptcy attorney to find out which branch you qualify for before your divorce. The attorney can also help you determine when to file.
Using Bankruptcy for Debt Relief Can Simplify the Divorce
Filing a couple’s bankruptcy offers some benefits when the couple is getting a divorce. If you file before your divorce, you can exit the marriage with fewer debts and financial constraints.
This is especially true if you use Chapter 7.
Chapter 7 eliminates all unsecured debts that qualify for a discharge. A discharge forgives debts you owe, leaving you without them. Your creditors can’t ask you for the money you owe if the court discharges the debts.
You benefit from this in two ways. First, you won’t have to fight with your spouse over how to divide the debts you owe – you wouldn’t have any. As a result, you’ll be able to settle the divorce a lot easier.
Second, when you get divorced and move into separate households, you won’t have large debt payments to make each month. With fewer debts to pay, you might not suffer financially as you’re trying to support yourself.
If the bankruptcy laws preclude you from using Chapter 7, you’ll have to decide if you should use Chapter 13. If you decide to, it might be better to file your case after the court approves your divorce.
Seek Legal Advice for Your Situation
Do you desperately need debt relief? Are you also planning your divorce case? You can do both at the same time or one before the other. Every case is unique, so it’s important to seek legal advice before deciding.
If you live in Omaha, Nebraska and need legal advice for your situation, call Husker Law today at: (402) 415-2525. We would love to hear from you and help you through your situation.
