Filing for Divorce When also Filing for Bankruptcy


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Going through a divorce is often difficult and may become a tricky and emotional affair, but doing so while also filing for bankruptcy is enough to break a person. It is recommended to have a lawyer for divorce proceedings, and this could affect how the bankruptcy procedure works and what is affected by either spouse.

The type of bankruptcy that is filed will greatly depend on how much disposable income the husband or wife has after all expenses are paid. The factors of the divorce may also be included in the filing. Most that are unable to pay off debt through disposable income and are not owners of a business file Chapter 7 procedures. This type may occur through several months, but may be completed before or during the divorce, and may lead to fewer assets shared or negotiated with during the relationship dissolution. It may be recommended that both spouses complete a Chapter 7 before filing for divorce so that all the processes have been completed and the conclusion of the bankruptcy does not further affect the divorce proceeding.

There are other types of bankruptcy such as the Chapter 13 which may take three to five years to complete. It is better to finalize a divorce before starting this process as it may complicate the marriage dissolution and lead to further problems. If one or both spouses own a business, bankruptcy may be filed so that the debts of the company are handled and do not touch the personal assets of the owner. However, it is possible that debts could extend beyond the business and engulf personal finances and lead to another bankruptcy process. When going through these procedures, it is best to contact a lawyer to ensure there are not additional complications or issues that could affect the divorce.

The Type of Bankruptcy

While divorce proceedings are specific and affect the assets and liabilities each party has, the bankruptcy type will also affect these assets and liabilities. If the divorce is progressing at the same time as the Chapter 7 or 13, then what is afforded or divided between spouses in the divorce may change. Sometimes, the divorce processes before the bankruptcy is over, and this could lead both parties back to the courtroom for a reprocessing of these issues. For the Chapter 7, this would mean that all debts or most of the liabilities are removed from the circumstances. However, most of the assets that were not exempted may also have been taken away for sale by a bankruptcy agent.

With the Chapter 13 process, the divorce may still have some debts and possessions. The Chapter 7 may provide an exempted vehicle, but in the 13 process, these assets are rarely removed for sale. The applicant has enough disposable income to pay for some debts. This may ensure that other assets are untouched and may remain for division in the divorce proceeding. If the debts accrued are equally owned by the wife and husband, they may still be split. This could then affect the bankruptcy procedure. It may be necessary to hire two lawyers to keep these processes in line and for all appropriate files, paperwork and records to the correct officials.

Factors of Bankruptcy and Divorce

While it is recommended to only process either a divorce or bankruptcy at a time, some couples cannot wait to be removed from the marriage even if a Chapter 7 has been initiated already. The assets that are sold or removed from possession in the bankruptcy process could affect what is provided to the other spouse. This may also change what child support is demanded based on what assets still exist. If the husband or wife is left with nothing after the procedure has finished, the judge may not be able to evenly split assets or liabilities. Additionally, if child or spousal support are needed through the divorce proceedings, a bankruptcy file could alter these amounts if any could be supplied. This may lead to longer processes, a new divorce in court or a judge that must make a temporary determination until the bankruptcy has been cleared. In instances of a Chapter 13, this could take years.

Legal Help with Divorce and Bankruptcy

The type of lawyer hired for bankruptcy may depend on the chapter filed. However, a family law lawyer should be retained for the divorce to ensure all the rights of the client are protected. Any help with documentation may be possible through the lawyer.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.

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