If your financial situation is strained beyond repair, you may be considering filing for bankruptcy. As couples work through the divorce process, it’s not uncommon to find the debts ledger is longer than the assets list. Upon finding themselves in this situation, many couples decide their financial situation is dire enough to require filing for bankruptcy protection. Unfortunately, it’s not advised to file for bankruptcy when you’re in the middle of a divorce. Because your financial health, debts, and assets are an important part of the divorce process, the outcome of your bankruptcy will directly impact property division in your divorce case.
Upon filing for bankruptcy, all non-exempt assets become are included in your bankruptcy estate. Assets in your bankruptcy estate cannot be distributed during the property division phase of your divorce. If you have children and a financially dependent spouse who will need support payments, that phase of the divorce could impact your bankruptcy hearing because your support payments are a liability that would need to be considered during your bankruptcy. So, it’s best to choose either bankruptcy or divorce and then finalize one before starting the other. For help choosing which one to tackle first, keep reading.
Why You Should File for Your Divorce First
There are many reasons why filing for your divorce first makes sense. For starters, your financial situation is completely entangled with your spouse’s as long as you’re married. So, if you get divorced before filing for bankruptcy, you do not have to complete the bankruptcy process with your ex-spouse. However, the downside of waiting until after the divorce is finalized means you and your ex would need to file for bankruptcy separately and pay twice the fees. Another benefit to waiting until after your divorce is finalized is you may now qualify to file for Chapter 7 bankruptcy protection, which provides faster resolution to your debt struggles.
Another downside to waiting until after your divorce is finalized is the issue of your property division order by the family court. If your spouse was assigned any joint debt, it could be good for them to have it discharged in bankruptcy court, but the credit can still come to you as the joint owner to pay off the total owed. Unfortunately, the family court would not be able to enforce payment since it was legally discharged. So, if you know you or your spouse plans to file for bankruptcy, you should refrain from taking or assigning joint debt if possible. Both bankruptcy and divorce are complex legal situations. You will need help from both a divorce lawyer and bankruptcy attorney to ensure you have access to the best possible legal assistance. Your attorney should review your case and help you choose which case to file first.
Elk Grove Divorce Lawyers
Navigating the legal system isn’t easy, which is why our Elk Grove family lawyers are available to help parents find viable solutions to their legal woes. Our team is available for consultations whether you’re struggling to pay your child support and are seeking modification or trying to enforce a child support order. At Samra Dhillon & Associates, we have divorce lawyers on staff to help you develop a strategy for your unique situation. Call us today at (916) 571-1550 to schedule a consultation.