For many couples, unfortunately, bankruptcy and divorce go hand in hand.
The statistics are quite discouraging and telling. Nearly 50 percent of marriages end in divorce. Of those, 22 percent of divorces are caused by money issues or disagreements about how to spend money.
If you and your spouse are contemplating bankruptcy and divorce, should you file for one before the other? Does it matter?
People file for bankruptcy because they can't pay their debts. In community property states, debts acquired during marriage are community property, meaning both spouses will be responsible for said debts. Since both spouses are drowning in uncontrollable debt, it may seem like an obvious choice to file for bankruptcy first, then divorce.
However, that is not necessarily true. Filing for bankruptcy before divorce, or vice versa, may be more beneficial depending on the amount of property you have, how much you want to spend, and your income levels.
Benefits of Bankruptcy First
Filing for a bankruptcy before divorce can save you a significant of amount of money for several reasons:
Benefits of Divorce First
Filing for divorce before bankruptcy may be more beneficial if you and your spouse have high incomes.
To qualify for Chapter 7 bankruptcy, your income must be below a certain amount. When filing for bankruptcy while married, your joint income is used to determine your eligibility. If your joint income is too high for Chapter 7 bankruptcy, you may be able to qualify based on your individual income. In this case, you would want to wait until after a divorce to file for bankruptcy.
If you need help filing for bankruptcy and divorce, we suggest consulting an experienced bankruptcy attorney and an experienced family law attorney. Don't assume that an attorney will be familiar with both areas of law.