When considering bankruptcy and divorce, order matters
We recently talked about debt and divorce, and how these two important topics are inextricably linked. Continuing that conversation, today we’re going to talk about bankruptcy and divorce, and how these two legal options are not only linked, but provide splitting spouses with an ample opportunity to save money or reduce the financial stress of their lives.
When you are considering both bankruptcy and divorce, you need to decide which one you are going to file first. Depending on your choice, it will dramatically affect how your life proceeds.
If you choose to file for bankruptcy first, you can expect a reduced cost in terms of filing (a joint bankruptcy filing costs the same as an individual filing) and you can expect more exemptions that you can use. Exemptions can be used to protect assets and property in the bankruptcy process. As an individual, you have an allotted amount. As a joint filer, you could see your exemptions double, depending on the state laws.
if you file for divorce first, there is also a benefit. Since Chapter 7 bankruptcy requires the filer to be under a certain income threshold, getting the divorce first means that your bankruptcy filing will only consider your one income — as opposed to the joint incomes of you and your (now ex-) spouse.
Financial issues are central to most divorce cases, and so it is imperative that anyone going through a divorce — and considering bankruptcy — discusses their situation with an experienced attorney.
Source: FindLaw, “Bankruptcy and Divorce: Which Should You File First?,” Le Trinh, July 23, 2015