One of the biggest reasons couples argue is because of money issues. When two people decide to file for divorce, yet also need to file for chapter 7 bankruptcy, it is important to file for divorce and bankruptcy in the right order. With money clearly an issue, it is cheaper for two people to file bankruptcy together. Unless the combined income of both parties is too high to file bankruptcy together, wiping out debt through a bankruptcy together is the easiest way to dissolve debt and divide assets.
One Filing Fee Instead of Two
Filing for bankruptcy costs money, and the filing fees are the same for two people filing jointly as they are for one person filing alone. If you want to get rid of unsecured debt, filing a chapter 7 bankruptcy can be completed within a few months. Many couples that need to file for bankruptcy file together before beginning divorce proceedings because it is the easiest way to discharge debt and move forward with a legal separation of assets.
Filing a Chapter 13 Bankruptcy Takes Years
In a chapter 13 bankruptcy, debt is restructured and paid back through a repayment plan. Couples that want to file a chapter 13 bankruptcy will find that if they file together, they will spend years having to work together to come up with a reasonable repayment plan for each party. Since Chapter 13 bankruptcy takes several years, it is better for a divorcing couple to file for chapter 13 bankruptcy after they have filed for their divorce.
Property Protection When Filing for Bankruptcy
As an individual filer, you are allowed to keep certain amounts of personal property. This exemption may double if you file together, depending on the state in which you live. If you own a sizable amount of property, it may be beneficial to divide the property first and then each file for bankruptcy on your own. Once a bankruptcy has started, you can't divide, sell, or otherwise liquidate any property that you own until the bankruptcy is over.
Bankruptcy Prior to a Divorce Releases Credit Card Debt
One of the major reasons couples file for bankruptcy prior to a divorce is to get rid of credit card debt. Even if the debt is divided up during a divorce, if the party deemed responsible for the debt doesn't pay, the other party can be on the hook with creditors. Filing for bankruptcy gives a divorcing couple a clean financial break from each other without the worry associated with credit card repayment plans.
When you need to file for a divorce and you are also considering bankruptcy, contact an experienced attorney like Julie A Philipi Attorney at Law in your area to discuss your options.