Rancho Cucamonga Bankruptcy During Divorce Lawyer
In California, community debts are usually divided in divorce, which is why many people finally take a close look at their debt balances in the middle of divorce. Often, they are shocked at the size of their debts. Credit card, medical debt, and personal loans can appear overwhelming. Because it’s usually more expensive to live as a single person, divorcing couples are scrambling for ways to manage their expenses. Many men and women in divorce ask, “Can I file for bankruptcy to get rid of all this debt?”
The answer is “yes,” but there are many considerations you should talk through with an experienced lawyer. A bankruptcy can throw a wrench into a divorce, and you should consult an experienced Rancho Cucamonga bankruptcy during divorce lawyer for assistance. Let us discuss timing and other critical considerations.
Key Considerations for Bankruptcy During a Divorce
Although you might feel overwhelmed with debt, the last thing you should do is run to the courthouse and immediately file for bankruptcy without meeting with an attorney first. Instead, think through the various considerations with a lawyer:
- Means test. To file for Chapter 7 bankruptcy, you need to pass a means test, which compares your household income to the state’s median. If you are married, your combined income might be over the limit. This means it might make sense to wait until divorce, then each ex-spouse can file.
- Debt reorganization. The alternative to Chapter 7 is Chapter 13. This requires a repayment plan lasting 3-5 years. For that reason, this is not a good option for couples who are divorcing. However, to be eligible after divorce, a person needs a regular source of income, which might disqualify you if you are unemployed.
- Qualifying debts. Bankruptcy can only eliminate certain debts. The bankruptcy code excludes many common family law obligations, like alimony and child support. You can’t eliminate those during, or even after, divorce. You’re stuck with them. That might impact whether you file for bankruptcy at all.
- Automatic stay. Once you file for bankruptcy, an automatic stay prevents collection action or any other action related to your property. It will be impossible to divide your community property until the bankruptcy is completed.
Some couples choose to file for Chapter 7 bankruptcy while married, which can help them eliminate joint debts. But that’s not the correct choice for everyone.
At the same time, there are risks to waiting. You might have a joint debt with your spouse, like a joint credit card balance. Even if a judge divides this debt in divorce, a creditor can come after you for the full amount if your name is still on the debt. You might want to eliminate all joint debts like this while married.
Reach Out to Our Law Firm
Wadhwani & Shanfeld has helped many divorcing clients navigate the bankruptcy process. There are difficult choices to make, and we are happy to act as a sounding board. If you have questions, please call us to speak with a Rancho Cucamonga bankruptcy during divorce lawyer about your case.
