Not so long ago divorce was about child custody and division of assets. There was very little in the way of debt to split up unless it went along with the house, or was a car loan. Today, figuring out who pays what is the crux of the divorce battle. There are three times you might want to consider filing bankruptcy:
- Before you file divorce
- During the divorce proceeding
- After the divorce is granted.
The optimal time to file bankruptcy as part of your divorce planning is ahead of your divorce. It works best if both of you can file a joint case. That way you can eliminate your unsecured debt and whatever secured debt you choose not to keep. Then you can both concentrate on dividing the assets, and planning for the best interest of your children through custody, visitation and support.
Individual Bankruptcy Filing for Income Reasons
There might be situations where a joint bankruptcy is not an option. That can happen if your combined incomes exceed the State median income for means test purposes. If bankruptcy can benefit your situations it might still work if you each file individual bankruptcy cases. Each of you can then reduce your means test income through the marital adjustment, which might get you under the chapter 7 wire. The adjustment allows an individual filer to deduct from income non-household expenditures of the other spouse. These deductions are not available in a joint case. Sadly in today’s world, high incomes come with excessive mortgages, and other secured debts for expensive cars and boats, which actually can get you under the means test wire together.
The Vindictive Non-Communicative Spouse
Your relationship may have diminished to the point the two of you cannot or will not agree on anything. You might not be able to even converse anymore. An important decision like a joint bankruptcy requires input from each of you. At the very least both will need to cooperate with a bankruptcy attorney. One may have lost the ability to trust the other, and will not do anything the other asks. Under those circumstances a joint filing simply will not be possible regardless of the benefit.
Be Better Able To Pay The High Cost of Divorce
At this point in your relationship an individual bankruptcy filing can be helpful. Divorce is very expensive. It costs much more than bankruptcy. With a bankruptcy case you will get the benefit of not having to worry about the monthly cost of your debt payments while you are sorting out the end of your marriage. This can be especially helpful if the debt is solely in the name of one spouse.
Filing bankruptcy ahead of divorce can put you on the road to a fresh financial start before you even walk into a divorce lawyer’s office.