Should Bankruptcy Be Filed Before or After a Divorce?

 Posted on August 29,2024 in Divorce

Divorce is a stressful time in a couple’s life. Perhaps financial struggles are one reason for the divorce. In fact, financial issues are the second leading cause of divorce after infidelity. As a couple, you may have even talked about filing for bankruptcy so the two of you could get a fresh financial start.

Now that you have decided to divorce, you may wonder whether you and your spouse should file bankruptcy before the divorce or whether it would be more beneficial to file after the divorce as a single person. The answer can be complex and unique to you and your financial situation.

While every situation is different, it can be beneficial to speak to a knowledgeable Will County, IL divorce attorney from Law Office of Ronald L. Hendrix, P.C., who can help you make a decision regarding bankruptcy as well as all the other divorce decisions you will make. You can expect to receive highly personalized attention and answers to your questions when you choose our firm.

Should You File for Bankruptcy Before the Divorce?

Bankruptcy timing is important, and there are pros and cons to filing for bankruptcy before you file for divorce. You will first need to consider the type of debt you and your spouse have. Is it mostly marital debt? Student loan debt for one or both of you? Perhaps there is card debt taken on by one spouse without the other’s knowledge. If money is tight, filing for bankruptcy together results in only one filing fee, although the filing fee may be the least of your worries.

If you and your spouse have all your debt discharged through bankruptcy, then neither of you will be responsible for paying those debts after the divorce. Perhaps the most important thing to know is that if you do not obtain a discharge of debt through bankruptcy before the divorce, creditors for debts your spouse incurred during the marriage could still come after you for payment.

Since creditors are not parties to your divorce, they can pursue payment from either spouse, regardless of what the court orders as far as debt division. If you qualify for Chapter 7 bankruptcy, it may be better to file before your divorce, although you may lose a few assets. Chapter 13 bankruptcy involves a repayment agreement that will last three to five years, which means you will be paying off debt together long after the divorce is final.

What Are the Pros and Cons of Filing for Bankruptcy After Your Divorce is Final?

If you and your spouse do not qualify under the income guidelines to file for Chapter 7 bankruptcy because your combined incomes are too high, you might qualify on your own. However, if you are awarded the marital home during the divorce, you will need to see what effect bankruptcy will have on your home.

If your divorce is likely to be filled with contentiousness, you will probably do better to wait until after the divorce and file on your own. Bankruptcy, whether Chapter 7 or Chapter 13, requires a couple to work together. If you expect to file for Chapter 13 bankruptcy, you might do well to wait until after your divorce so you can put together a repayment plan that more accurately reflects your financial status after the division of assets.

Contact a DuPage County Divorce Attorney to Schedule Your Free Consultation

As a court-appointed mediator who holds a master’s degree in guidance and counseling in addition to his law degree, Attorney Ronald Hendrix is compassionate, knowledgeable, and highly skilled in all aspects of family law. At Law Office of Ronald L. Hendrix, P.C., we understand that divorce can be messy and difficult. We go out of our way to provide highly personalized service to all our clients, helping them through their divorce in the best way possible. A Naperville, IL divorce attorney from Law Office of Ronald L. Hendrix, P.C. is ready to answer your questions and explain the process. Call 630-355-7776 to schedule your free consultation.