Divorce and financial challenges often go hand and hand. In some cases, financial issues can be so significant, that couples, or one party, may consider whether it’s in their best interest to file for bankruptcy. When experiencing this form of hardship, there can be a plethora of challenges that range from the emotional strain of ending a relationship and the adjustment period that comes with divorce. When bankruptcy is on the table, couples are often faced with a number of questions. When enduring divorce, it may be a good idea to speak with a bankruptcy lawyer to help in answering the vast amount of questions you may be left with:
Should my spouse and I file for bankruptcy prior to filing for divorce?
This will depend upon a number of factors. While you will certainly want to consult with a lawyer regarding your unique situation, in some cases, filing jointly for bankruptcy may be in your best interest. However, it’s important to be aware that doing so will require the both of you to have the ability to work together amicably during the bankruptcy process. It’s important to be aware that a more straightforward bankruptcy, like Chapter 7 may be a more attractive option should you and your spouse file for bankruptcy prior to filing for divorce.
Can one party file for bankruptcy?
Yes. It’s possible to file for bankruptcy before a divorce is finalized. It’s important to be aware that when doing so your debts may be discharged but you will still be responsible for making child support payments.
How will bankruptcy proceedings impact the divorce process?
In some cases, moving forward with bankruptcy despite your divorce may be the only option, especially if you are struggling to pay your bills. Filing for bankruptcy during divorce can impact the way in which your assets are divided. Because of this, it may be difficult to make decisions about the division of property. Unfortunately, this may stall the divorce once the automatic stay is granted. This will result in putting the division of property on hold until the bankruptcy reaches completion.
What are common types of bankruptcy that I may be able to access?
Primarily, there are two forms of bankruptcy that people may choose from. Knowing which type of bankruptcy to choose may be challenging. Working with a bankruptcy lawyer is helpful as they can evaluate your specific situation to determine whether to choose Chapter 7 or Chapter 11:
- Chapter 7 is the more widely accessed form of bankruptcy that allows for many debts to be discharged. However, in order to access Chapter 7 you must be able to qualify. Chapter 7 liquidates all of your assets in order to pay off any outstanding debts. Many debts that cannot be paid are often discharged, allowing the person to walk away with a clean slate.
- Chapter 13 allows those looking to resolve debts to restructure their debts through a repayment plan. A repayment plan is often completed over the course of a 5 year timespan. Your lawyer will work with you to negotiate with your creditors and formulate a repayment plan that works for you.
How long will a bankruptcy remain on my record?
When considering bankruptcy, many may have concern over the length of time a bankruptcy will remain on a credit report. The length of time varies. Chapter 7 usually remains for 7-10 years while Chapter 13 often remains on a credit report for 7 years.
Divorce can be devastating. This can be coupled with hardship that includes sharing children, working out custody, making considerations for assets and even spousal support. When bankruptcy is another issue to contend with, it can only add to the hardship you may be facing. For more information regarding the best way to contend with bankruptcy when facing divorce, contact a bankruptcy lawyer in Melbourne, FL as soon as possible.
Thanks to the Law Offices of Arcadier, Biggie & Wood for their insight into bankruptcy law and divorce.