When should you file bankruptcy?

Answer 1

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).

Answer 2

First of all, one should never consider bankruptcy just to avoid being hassled by creditors. Some factors to consider, are, the amount and type of debt owed compared to the person's ability to pay those debts. Not all debts can be discharged in a bankruptcy and secured creditors always have the "relief of stay" option. Due to new bankruptcy reform, filing a chapter 7 will become extremely difficult. The best option would be consulting a qualified bankruptcy attorney, most offer free consultations or at a minimal fee.

I found a really good company that helps with this in the States. They have a toll free number and can answer your questions. 888-894-3275.

Answer 3

That depends on your situation: First, you must ascertain if you are eligible for a Chapter 7 or Chapter 11. Chapter 11 is a repayment plan while Chapter 7 is a liquidation plan.

If you and your spouse qualify for Chapter 7 before filing for divorce based on the "means test", then that is probably the answer for you. If not, you may wish to examine the issue in post-divorce terms.

If you do not qualify for a Chapter 7, then a Chapter 11 might well substitute for a property settlement agreement.

In any event, this is not a decision to take without the help of a qualified lawyer who practises in the area of consumer bankruptcy law. Make an appointment straightaway! That depends on your situation: First, you must ascertain if you are eligible for a Chapter 7 or Chapter 11. Chapter 11 is a repayment plan while Chapter 7 is a liquidation plan.

If you and your spouse qualify for Chapter 7 before filing for divorce based on the "means test", then that is probably the answer for you. If not, you may wish to examine the issue in post-divorce terms.

If you do not qualify for a Chapter 7, then a Chapter 11 might well substitute for a property settlement agreement.

In any event, this is not a decision to take without the help of a qualified lawyer who practises in the area of consumer bankruptcy law. Make an appointment straightaway!

Answer 4

of course you can. One does not inhibit the other. If you filed for bankruptcy as a couple, then the bankruptcy will proceed during the divorce, it just may complicate things. If you filed for bankruptcy as an individual then there should not be too much of an issue because you were only filing for bankruptcy as to your individual debt.

Answer 5

Yes you can. This can be tricky as to how to you are filing. If you are filing as an individual then keep in mind that the community debts will stay with the community so you may want to look into the extent of your individual debt obligations before taking this drastic step.

Answer 6

Yes. It happens all the time as many marriages dissolve over money issues. It can make for much easier division of assets. The article below discusses divorce and bankruptcy in greater detail.