Divorce & Bankruptcy
No doubt, money and love are two of the most emotionally charged issues in life – and they are often intertwined. Sometimes, everything seems to go sideways at once, with financial issues leading to marital problems, or vice versa. It is not uncommon for couples to find themselves facing double trauma: divorce and bankruptcy.
Although this is certainly a time of stress and upheaval, there is light at the end of the tunnel. Both bankruptcy and divorce can provide a fresh start and eventually lead to a better situation. If bankruptcy is an issue and you are contemplating divorce, or if looming divorce is causing you to consider bankruptcy, it is important to consult with an attorney before moving forward.
An experienced Lexington, KY, bankruptcy attorney can advise you of your rights and options and help develop a successful strategy. With 35 years of experience assisting clients filing for both bankruptcy and divorce, Bunch & Brock offers wise counsel that can greatly ease the process. We are committed to providing each of our clients with a high level of personal service, which means taking the time to fully understand your situation and discuss options for debt relief. For immediate assistance, please contact our office today by calling 859-469-4821, or fill out this online form to request an appointment.
Divorce and Bankruptcy: Thinking it Through
If you expect to be filing for both bankruptcy and divorce, planning ahead can make both proceedings less complicated and more cost effective. Generally, the best course of action when divorce is on the table is to resolve as many problems as possible before filing. First, a less contentious split means a much less costly divorce. And, if your finances are indicating that bankruptcy is inevitable, it is important to resolve divorce issues that would impact your Chapter 7 or Chapter 13 filing.
Timing is Everything
In most cases, it is highly advisable to file for bankruptcy before pursuing a divorce. By filing for Chapter 7 bankruptcy, your responsibility to pay dischargeable debt is wiped out, so you can avoid dealing with debt in divorce court. Do not make the mistake of filing for divorce and bankruptcy simultaneously. To prevent unnecessary complications, it is much better to complete bankruptcy proceedings first, a process that normally takes about six months.
Why pursue bankruptcy before filing for dissolution? For a few reasons:
First, if bankruptcy is filed between the initiation of divorce and the final judgment, the bankruptcy’s automatic stay will cause a temporary standstill in the divorce proceedings. The automatic stay will prevent transfer of property between the couple, halting division of property and debts. This is because a state family court cannot make decisions about property as long as a federal bankruptcy court has control over it.
Filing for bankruptcy before a divorce can simplify the issues regarding debt and property division, resulting in lower divorce costs. Eliminating debts through bankruptcy prior to filing for divorce means there is one less large issue the parties have to address in the proceeding. Bankruptcy can also eliminate contracts that neither spouse wants, such as car loans that are too pricey or underwater mortgages.
Filing for Divorce First
Depending on individual circumstances, there are a few instances where filing for divorce first may be preferable. The biggest advantage may be having the support considerations already worked out. If you are going to owe a lot of support, it helps to know that amount before declaring bankruptcy. Child support and alimony are not dischargeable debts and will survive bankruptcy.
If you must file for divorce first, don’t agree in your divorce papers to pay for joint debts. If divorce is filed first and you agree to be responsible for jointly held credit cards, your subsequent bankruptcy will not eliminate your responsibility to pay. (Conversely, once you have filed for bankruptcy, do not agree in subsequent divorce papers to pay for joint debts that may still be in your name. This could reestablish the liability that has been wiped out by the bankruptcy.)
Seek Legal Counsel
The laws surrounding divorce and personal bankruptcy are complicated. Each person’s situation has a unique set of facts, and the best course of action varies depending on where you live, how much property you have, how much debt you have, and what type of bankruptcy petition you wish to file. For more detailed, specific information, consult the bankruptcy lawyers at Bunch & Brock by calling 859-469-4821 or filling out this online form. We have helped countless individuals get the relief they deserve, given their personal set of circumstances, and we can help you.