Money matters are one of the leading causes of divorce in America today. When couples decide to divorce, those money problems may lead them to seek out both a bankruptcy and a divorce. Deciding which one to file first can be complicated and stressful, and it boils down to personal circumstances. Hiring an experienced bankruptcy and divorce lawyer in Philadelphia will help you figure out your best options.
When to File for Bankruptcy First
An important factor when deciding which to file first is whether the couple is on good terms, and are willing to work toward the best option for both parties involved. If this is the case, then for some couples, filing for bankruptcy before a divorce can help reduce the overall costs and stress. Costs can be reduced by filing jointly and accruing only one lawyer fee, but when you file independently after the divorce, both individuals involved will have to pay the fees. For couples who own little property and have many debts that will be included, this is a good option because they can qualify for Chapter 7 bankruptcy and have their debts discharged. The bankruptcy will usually be completed in 120 days, so the debt division of the divorce will be expedited.
When to File for Divorce First
For some couples, filing for a divorce first can yield the best outcome. Filing for divorce first is a good option for those who own a lot of property, or who have higher incomes. If both parties work at higher paying jobs, you may choose to file for divorce first because your combined income may be too great to allow you to file for the quicker Chapter 7 bankruptcy. However, by filing independently once the divorce is final, you could possibly both qualify for Chapter 7.
If, in this situation, you opt to file for Chapter 13 bankruptcy before divorcing, the repayment plan is shared by both parties and you may be unable to sell off some items for division of property. In addition, if one party makes all of the income and you divorce prior to Chapter 13 bankruptcy, the non-wage-earner will still be held responsible for half of the repayment that was set based on the wage-earning spouse’s income. By dividing the property and jointly held debts during the divorce, a subsequent bankruptcy can go more smoothly and you could reduce the time frame needed to repay the designated portion of a Chapter 13 bankruptcy. One thing to keep in mind is that much like student loans and mortgages, support payments are protected during bankruptcy and are considered when setting up a repayment plan during a Chapter 13 bankruptcy.
The courts will treat bankruptcy debt differently based upon your marital status, so consult a bankruptcy lawyer in Philadelphia who also has experience in divorce law and can help you decide if filing bankruptcy first is in your best interest.
To learn more about filing for divorce and/or bankruptcy, please contact William D. Schroeder, Jr., Attorney at Law. For over 30 years, Mr. Schroeder has provided expert service as a bankruptcy and divorce lawyer in Philadelphia and surrounding areas.
