Can You File for Bankruptcy and Divorce at the Same Time?
Filing for bankruptcy and going through a divorce are two of the most stressful legal and financial experiences a person can face. If you are struggling with overwhelming debt while also preparing for a divorce, you may wonder whether it is possible—or even beneficial—to file for both at the same time.
While legally permitted, pursuing bankruptcy and divorce simultaneously can create complications, delays, and unintended consequences that may affect both proceedings. Consulting a Los Angeles bankruptcy attorney can help you make your decision.
How Bankruptcy Affects the Divorce Process
The Automatic Stay and Its Impact on Divorce
One of the biggest challenges in filing for bankruptcy and divorce at the same time is how the two legal processes intersect. When a bankruptcy case is filed, the court issues an automatic stay that halts most legal actions, including efforts by creditors to collect debts. This stay can also impact aspects of a divorce, particularly those involving the division of marital assets and debts. Since bankruptcy courts handle financial matters and divorce courts oversee property distribution, the automatic stay can cause delays in finalizing the divorce.
It is important to note that while the automatic stay affects property division and debt collection, it does not stop family law matters such as child support, spousal support, or custody proceedings. These aspects of a divorce will continue regardless of the bankruptcy filing.
Should You File for Bankruptcy Before or After Divorce?
Filing for Bankruptcy Before Divorce
In many cases, filing for bankruptcy before divorce is a better option, especially if you and your spouse have significant joint debts. There are several benefits to this approach. First, filing before divorce can eliminate many of the debts that would otherwise need to be divided during the divorce process. This makes the division of assets and financial responsibilities simpler.
Additionally, a joint bankruptcy filing before divorce can save money on legal fees and court costs, as both spouses share the expense of one case rather than filing separately. Another advantage is that if you and your spouse file for Chapter 7 bankruptcy, your combined income may still be low enough to qualify. Since Chapter 7 discharges unsecured debts in just a few months, it can provide a clean financial slate before proceeding with the divorce.
However, this approach may not be suitable in all cases. If you and your spouse are not on good terms, cooperating in a bankruptcy case may be difficult. Additionally, if your combined income is too high, you may not qualify for Chapter 7 and could be forced into a Chapter 13 repayment plan, which can last three to five years.
Filing for Bankruptcy After Divorce
For some individuals, it makes more sense to wait until after the divorce is finalized to file for bankruptcy. One major benefit of this approach is that you can file individually, without being tied to your ex-spouse’s financial decisions.
Another advantage is that once you are divorced, your individual income may be lower, making it easier to qualify for Chapter 7 bankruptcy. If you file for bankruptcy after divorce, the debts assigned to you in the divorce decree can often be discharged, relieving you of financial burdens that remain after the marriage ends.
However, one significant drawback of waiting is that joint debts may still remain in both spouses’ names after the divorce. Even if the divorce decree assigns a debt to one spouse, creditors can still pursue both parties for repayment unless the debt is discharged through bankruptcy.
Handling Joint Debts in Bankruptcy and Divorce
One major concern in filing for both bankruptcy and divorce is how joint debts will be handled. In a divorce, debts are divided between spouses, but creditors are not bound by the divorce decree. This means that if a debt remains in both spouses’ names, a creditor can still pursue either party for repayment, even if the divorce agreement assigns responsibility to only one spouse.
By filing for bankruptcy before divorce, these joint debts can be discharged, preventing creditors from pursuing either spouse. If you wait until after divorce to file, make sure that debts assigned to you in the divorce decree are included in your bankruptcy filing so that you are not held responsible for them later.
Contact Wadhwani & Shanfeld
While it is possible to file for bankruptcy and divorce at the same time, doing so can lead to unnecessary delays and legal complications. The best approach depends on your financial situation, your relationship with your spouse, and the type of bankruptcy you qualify for.
Filing for bankruptcy before divorce can help eliminate joint debts and simplify the division of assets, but it requires cooperation between spouses. Filing for bankruptcy after divorce allows you to qualify based on your individual income, but it may leave you responsible for debts assigned in the divorce decree.
If you are facing both bankruptcy and divorce, it is essential to work with experienced legal professionals who understand how these two processes interact. At Wadhwani & Shanfeld, our knowledgeable bankruptcy attorneys can guide you through the decision-making process, helping you determine the best timing for your financial situation. Contact us today for a free consultation and take the first step toward securing your financial future.
Source:
upsolve.org/learn/need-to-know-about-divorce-and-bankruptcy
