How do divorce and bankruptcy work together?
When faced with serious financial problems, divorcing spouses should carefully evaluate the timing options for filing for bankruptcy.
Money problems are a common source of challenges in many marriages. Pennsylvania spouses who have experienced extreme financial hardship and who have decided that they can no longer remain married might also be contemplating filing for bankruptcy.
Knowing whether it is best to file a joint bankruptcy prior to filing for divorce or to file for divorce first and let each spouse manage their own bankruptcy later can be difficult. Every situation is unique and there is no one answer right for every couple.
Evaluate the type of bankruptcy plan
As explained by My Horizon Today, one factor that will direct the decision about filing for bankruptcy or divorce first may be the type of bankruptcy that is selected. A Chapter 13 bankruptcy plan lasts between three years and five years before it is completed. Given this, people who may seek a Chapter 13 bankruptcy may be better off doing this after they file for divorce. This avoids them putting off their divorce for many years once they have made the choice to move forward with it.
Simplification of debt and settlements
Nerd Wallet indicates that if a couple files for bankruptcy before they initiate their divorce, the divorce may be less complicated. This is because many of the debts the couple shared would have been eliminated, thereby simplifying some of the property division settlement . Couples do not only split assets but debts as well so this may be an important consideration.
Keeping the house or letting it go
According to Bankrate, a mortgage and family home might become some of the biggest reasons a couple chooses when they will file for bankruptcy or divorce. It is important to know that once a divorce settlement has been agreed upon, a bankruptcy may not have the power to change the debt arrangement.
This means if one person keeps the house and responsibility for the mortgage in the divorce and later wants to file for bankruptcy, the mortgage may not be able to be included. If a mortgage is involved, couples may be wise to sell the home before they get divorced or to file bankruptcy before the divorce to avoid this situation.
Communication ability matters
Most couples getting divorced have some type of problem communicating effectively. This should be evaluated as well given that filing a joint bankruptcy before getting divorced will require some cooperation on the part of both spouses. If this is simply not possible, then it may be better to get divorced first and let each person deal with their own financial picture after the divorce.
Given the many complexities involved in balancing a divorce and a bankruptcy close together, Pennsylvania residents are urged to reach out to an experienced attorney. This can help them best evaluate their situation and make the decisions right for them.