Bankruptcy and Divorce

Bankruptcy and DivorceDivorce is one of the big three reasons people file for bankruptcy (medical and job loss are the other two).  The interplay between these two areas of law can be complicated.  To make the right decision in terms of if and when to file for bankruptcy in the context of divorce, you need to know how bankruptcy can affect divorce and vice versa.

Generally, it makes the most sense to file for bankruptcy before getting a divorce. Since bankruptcy fees are the same for both joint and individual filings, you and your spouse can save money on fees by declaring bankruptcy while still married. Furthermore, attorney fees will likely be lower if you file jointly (make sure your bankruptcy attorney is aware of the upcoming divorce to avoid any conflict of interest).

Regarding Chapter 7 vs. Chapter 13, it is usually a better idea to file for a Chapter 7 bankruptcy before a divorce. A Chapter 7 bankruptcy filing will usually take only a few months to receive the debt discharge. A Chapter 13, however, will run for three to five years. Since this process drags on, if you want to file for Chapter 13 it is usually better to do so after the divorce.

Filing for bankruptcy before also simplifies the property division process that will take place during the divorce. However, this is only the case if you live in a state that allows for enough exemptions to protect all of your joint property. Some states allow you to double the exemptions if you file for bankruptcy jointly. If you can’t double the exemptions, it might be a better idea to file individually after the divorce. Check with your bankruptcy attorney to clarify what your state will allow.

Also, when deciding when and if to file for bankruptcy before/after a divorce, keep in mind that certain debts are not dischargeable. Non-dischargeable debts include: alimony, child support, student loans, and attorney fees related to child custody or support cases.  If possible, consult with a bankruptcy attorney before starting the divorce proceedings to get the best course of action (if the petition for divorce has already been filed then each party will need to consult with their own bankruptcy attorney).

Bankruptcy and Divorce in Portland OR and Salem OR

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