It is not uncommon for financial trouble and marital difficulties to go hand-in-hand. More often than many people realize, financial stress can play a significant part in the decline of a marriage. Since two processes are involved – divorce and bankruptcy – people often have trouble deciding which to pursue first.
While different advice fits better for different marriages, one common suggestion is that a couple should not attempt to complete both a bankruptcy and their divorce at the same time. But how to choose which path to follow first?
- File for bankruptcy before divorce: If the couple carries numerous marital debts, it might be wise to file for bankruptcy prior to getting a divorce. Filing a joint bankruptcy can eliminate a significant amount of unsecured debt streamlining the divorce process. Additionally, while the Bankruptcy Code follows federal guidelines, each state has its own set of exemptions. A couple filing for divorce might be able to keep a larger portion of the assets than they could if they were filing individually.
- File for divorce before bankruptcy: While there are numerous types of bankruptcy, the most common are Chapter 7 and Chapter 13. Chapter 7 is considered “debt elimination” bankruptcy while Chapter 13 is often called “debt reorganization and repayment.” The two are generally separated by a “means test” that takes income into consideration. It might be easier for a single individual to qualify for Chapter 7 than would a married couple.
Couples who are attempting to create two independent futures out of one marital household will face countless challenges through the process. From determining child custody to spousal support, the negotiations can seem endless. Fortunately, with experienced guidance, the divorce and bankruptcy processes can complement each other.