You probably already know that getting a divorce could significantly impact your finances. If you and your spouse already struggle to make ends meet, you may consider filing for bankruptcy. The problem of knowing when to file bankruptcy and when to file for divorce may plague you.
The only conclusive answer is not to file both at the same time. Thereafter, the choice depends on several factors. In many cases, it could depend on whether you and your spouse qualify for Chapter 7 or Chapter 13 bankruptcy.
Why can't we file both at the same time?
When you file for bankruptcy, an automatic stay goes into effect to keep creditors from collecting on the debts you owe, but it also freezes your assets.
Since a large part of any divorce is the division of property, a Louisiana family court could encounter difficulties with that part of the proceedings and delay finalizing your divorce. In addition, depending on what happens in the bankruptcy, you may not have the same marital estate at the end of the bankruptcy as you did at the beginning.
Reasons for filing bankruptcy prior to divorce
If your divorce is amicable, you may discuss filing for bankruptcy prior to filing for divorce.
One obvious reason for filing for bankruptcy prior to divorce is that you and your spouse share the filing fees. Secondly, each of you remains legally responsible for any joint debts. Waiting to file after the divorce could mean that you end up getting phone calls from your joint creditors after the divorce because your now-former spouse has no further legal responsibility for them if your former spouse receives a discharge.
If you and your spouse qualify for Chapter 7 bankruptcy, you can handle most of your joint debts within three to six months. Then you are free to divorce without worry about at least some of the marital debts. A Chapter 13 bankruptcy can take anywhere from three to five years to complete. Therefore, you may consider filing bankruptcy after the divorce if your joint income doesn't qualify you for Chapter 7.
What if we don't qualify for Chapter 7 bankruptcy together?
If Chapter 13 becomes your only option as a couple, you should know that it takes anywhere from three to five years to complete. It is possible to separate a joint Chapter 13 into two cases, but that process may be complex and could end up exposing you to liability for debts if something goes wrong. If you are not willing to wait that long or take the chance that it won't work, you may consider waiting to file for bankruptcy until after the divorce.
You don't have to make this decision alone
As you can see, whether to file for bankruptcy or divorce first requires a great deal of consideration. In order to make the best decision for your circumstances, you would benefit from discussing your circumstances with a bankruptcy attorney before making any decisions.