Divorce and Marriage Law
Debt and Bankruptcy
Bankruptcy Law

What is the timing for when you should file for bankruptcy when also filing for divorce?

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Wiki User
2005-04-04 03:35:29

There are too many factors which could change the outcome of

this situation, so you should really see a lawyer. Generally

speaking, if both spouses are willing to file BK, it's best to file

together before the divorce is final (its okay to file a BK

together once the divorce has been filed, but you have to file

jointly before the divorce becomes final or it's too late - it is

usually better to file BK after the divorce is filed but before

it's final because by then the spouses have separate households, so

expenses are higher and it's easier to qualify for Chapter 7).

Filing BK amicably together is ideal because it saves money, it

saves a fight later, and it makes the divorce easy since there's no

debt to divvy up. However, if only one spouse is filing BK, it is

generally better to file after the divorce is final or else the

divorce court could stick you with debts you just wiped out in

bankruptcy. For example, say Wife wants to file BK. Hosband and

Wife owe $20,000.00 in joint credit cards. Wife wipes out her half

in bankruptcy, then files divorce. The divorce court may say

something like "I want to divide the debt evenly, so each spouse

has to pay $10,000.00." So, even though Wife wiped out her

liability on the debt as far as the credit card companies are

concerned, the divorce court - in evenly dividing debt - can still

order her to pay half, and she can't then file bankruptcy on her

obligation to pay half because her obligation to pay half is a

post-bankruptcy obligation, and only pre-bankruptcy obligations can

be discharged in BK. It would be better for Wife to get stuck with

$10,000.00 of the debt in the divorce, then after the divorce is

final, file BK on the credit cards and on her divorce obligation to

pay half (though there can be complications if Wife's discharging

her half results in a greater hardship on Husband than it would be

on Wife if she kept the debt, see 11 USC 523(a)(5) and (a)(15) -

and keep in mind (a)(15) only applies to Chapter 7 cases). If a

hardship on Husband might occur, Wife could file a Chapter 13 and

still get out of the situation with minimal debt since 11 USC

(a)(15) does not apply to Chapter 13's (see 11 USC 1328(a), which

does NOT list (a)(15) as an exception to discharge).

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