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Bankruptcy & Divorce: What You Need to Know

Dec. 19, 2021

Seeking a divorce is a stressful and overwhelming process. However, it can become even more burdensome if a divorcing couple has financial problems. While the end of a marriage often becomes the reason for a bankruptcy filing, it is essential to consider whether you should file for bankruptcy before or after the divorce.

Below is the list of factors you need to consider when deciding which to file first: divorce or bankruptcy. Consider contacting The Law Offices of John R. Bailey to make an informed decision in your particular situation. Attorney John Bailey advises clients on their bankruptcy options in Ypsilanti, Michigan, as well as in Ann Arbor, Belleville, Kalamazoo, and Portage.

Filing for Bankruptcy Jointly

When spouses are on good terms, they have the option of filing for Chapter 7 bankruptcy jointly. Filing for bankruptcy together as a married couple offers several benefits. One of them is that it costs less to file for bankruptcy jointly than separately. When spouses file for bankruptcy together, they can discharge marital debt, making the asset division process in a future divorce proceeding more straightforward.

Filing for Bankruptcy Separately

Just because a person is married does not obligate them to file for bankruptcy together with their spouse. Married individuals can also file for bankruptcy separately. In some cases, a person might find it easier to qualify for discharge of debt under Chapter 7 bankruptcy when filing separately. In addition, if a divorcing couple is not on good terms, filing for bankruptcy jointly could do more harm than good.

Which to File First: Bankruptcy vs. Divorce?

Many people who live in Ypsilanti, Michigan, often call Attorney John Bailey and ask, “Which do I file first: bankruptcy or divorce?” There is no clear answer to that question without analyzing all the facts and circumstances of each individual case.

However, it is generally not a good idea to file for bankruptcy while your divorce case is ongoing. In most cases, one proceeding will be delayed until the other is finalized. So, which to file first? Bankruptcy or divorce? Whether you should file for bankruptcy or divorce first depends on your financial situation, the amount of debt, your marital assets, and a multitude of other factors. Speak with an experienced bankruptcy attorney to analyze your specific situation and determine whether it makes more sense to file for bankruptcy or divorce first.

Asset Division and Bankruptcy

While filing for bankruptcy does not release you from your domestic support obligations (alimony and child support), it could delay the distribution of assets until the bankruptcy case is complete. Many divorcing individuals file for Chapter 7 bankruptcy because it allows them to eliminate debt and get a fresh start. Chapter 7 also allows the debtor to keep many of the things they need to work and live. If you file for bankruptcy after your divorce is final, the bankruptcy trustee assigned to your case will review your divorce decree and check how the court divided the assets between the spouses.

Discharge of Debt

Any debt owed by one former spouse to the other in the form of alimony or child support cannot be discharged through a bankruptcy filing. However, divorcees may be able to eliminate some debts stemming from their divorce case, such as attorney’s fees. A debtor could also wipe out their liability to a credit card company for the joint debt after the divorce. Consider speaking with a knowledgeable divorce attorney to review your particular situation and determine which debts are dischargeable before or after a divorce.

Rely on Experienced Legal Counsel

If you cannot decide which to file first – divorce or bankruptcy – consider seeking out legal counsel from Attorney John Bailey in Ypsilanti, Michigan. The skilled and reliable divorce & bankruptcy lawyer at The Law Offices of John R. Bailey provides guidance and support to his clients to help them make informed decisions for their particular situations. Schedule a consultation with Attorney John Bailey to discuss your case today.