Both divorce and bankruptcy can be life events that lead to the other. After divorcing, some people cannot make it on their own if they have debts they cannot afford to pay. Large medical bills and credit card debt are leading causes of financial stress for people already working hard to pay their bills. It is smart to ask for a legal consultation with not only your divorce attorney but also an experienced bankruptcy attorney so you can plan the best strategy that makes sense for you and your future.
What is the difference between Chapter 7 and 13 bankruptcies?
Most people think about bankruptcy and the full discharge of all your qualified debts, which would be Chapter 7, the full discharge. To qualify for Chapter 7, you must meet income and means tests. If you make too much money you can still qualify for Chapter 13 and repay a portion of your debts over several years to get caught up.
Do I have to wait until after my divorce to file for bankruptcy?
People considering a Chapter 7 or 13 bankruptcy frequently ask their bankruptcy attorney how their divorce filing will affect the bankruptcy. You may have your own individual bankruptcy case or a joint bankruptcy filing as husband and wife. Once the bankruptcy is filed, your status as married or divorced does not matter and it will not affect your bankruptcy.
If, however, you are unable to make the scheduled payments to the bankruptcy trustee in a Chapter 13, reorganization bankruptcy, your bankruptcy lawyer may file a motion with the court to adjust your payments based on your ability to pay.
Eliminating debts in bankruptcy before dividing assets in the divorce can make sense.
If you and your spouse have shared responsibility to creditors and are joint obligors on credit cards, and if one or both of you filed for bankruptcy, it can make sense to wait until the bankruptcy is discharged before dividing marital assets.
It is important to have both an experienced divorce and bankruptcy attorney.
Divorce lawyers Collin County TX residents frequently rely on can help you through these complicated issues. While some divorce attorneys also practice bankruptcy law, it is more likely you will hire separate attorneys for each. If you consent for your attorneys to talk to one another about your best interests, they will be able to consider your financial situation properly and help determine the best course of action.
Thanks to our friends and contributors at Scroggins Family Law for their insight into divorce.