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Divorce And Bankruptcy: Which Should Come First?

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If you are considering consumer bankruptcy but you are also considering the possibility of filing for divorce, it can be extremely complicated to navigate both legal processes. In particular, you may be wondering about the order in which you should take action to file for bankruptcy and to file for divorce? Should bankruptcy come before divorce or vice versa? There is no single answer to that question, and the answer for you will depend upon the particular facts of your case and the type of bankruptcy for which you are planning to file. Our West Palm Beach bankruptcy lawyers can explain in more detail, and we can clarify the ideal order of bankruptcy and divorce filings in situations that may be similar to your own.

When Both Spouses Plan to File for Bankruptcy 

Spouses can file a joint petition for bankruptcy under the U.S. Bankruptcy Code. However, if the spouses are planning to get divorced in the near future while also considering consumer bankruptcy, it is critical to understand that a Chapter 7 bankruptcy case likely should occur before the divorce, but a divorce should likely occur before a Chapter 13 bankruptcy filing.

When a married couple is planning to file a joint petition for Chapter 7 bankruptcy (or both spouses want to file for bankruptcy), the liquidation bankruptcy usually can be completed in a relatively short amount of time, and the liquidation of non-exempt assets typically means that the divorce will be much simpler and easier to navigate. To be sure, if the spouses are only left with exempt marital assets (as opposed to all of the marital assets that are not exempt and would be liquidated in a Chapter 7 bankruptcy, in addition to separate and marital debts that are eligible for discharge in a Chapter 7 case), the divorce can usually go much quicker and much more smoothly. There are few reasons that a married couple planning to file for Chapter 7 bankruptcy would get divorced before the bankruptcy case and discharge.

However, Chapter 13 bankruptcy is much different. If both spouses plan to file for bankruptcy, a joint petition for Chapter 13 bankruptcy will mean that the spouses will be tied to one another during the period of the repayment plan, which will typically last from three to five years. Accordingly, when both spouses plan to file for Chapter 13 bankruptcy, it is usually easier to get divorced first.

When Only One Spouse Plans to File for Bankruptcy 

In a Chapter 13 case it nearly always makes sense, for the reasons outlined above, for a married couple to get divorced before one of them files for Chapter 13 bankruptcy. This way, all marital property will be divided between them, and the spouse who files for bankruptcy will enter into a repayment plan for his or her separate property and portion of marital assets and debts.

In a Chapter 7 case where only one spouse wants to file for bankruptcy, it will be important to seek advice from an attorney because these cases can vary widely. If there are significant marital assets and debts, it could make sense to file for divorce first before one of the parties files for bankruptcy. However, if there is limited marital property, it could still make sense for one spouse to file for Chapter 7 bankruptcy before the divorce.

Contact a Bankruptcy Lawyer in West Palm Beach 

If you need assistance determining when to file for bankruptcy, you should seek advice from one of the West Palm Beach bankruptcy attorneys at Kelley, Fulton & Kaplan as soon as possible.

Source:

law.cornell.edu/uscode/text/11

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