Which Should Come First: Bankruptcy or Divorce?

Which Should Come First: Bankruptcy or Divorce?

Financial problems and divorce often go hand in hand. Because of this, many separating couples find themselves facing two major life changes at once—bankruptcy and divorce.

This leads to an important question: should couples file for bankruptcy first, or wait until their divorce proceedings are concluded?

Every Situation is Different

The answer to this question depends on the situation. A married couple can file together, but once the divorce goes through, two separate cases must be filed. That means an additional filing fee. But—and this is a huge but—Chapter 13 bankruptcies are more difficult to manage once you are divorced. Additionally, if you are still legally married, you and your spouse’s combined income will be calculated together when determining what sort of bankruptcy you can file.

Three important factors are settled in a divorce: property division, custody, and child support. While the effects of custody and child support are situational, unresolved property conflicts will almost always complicate bankruptcy proceedings. Since sorting out property rights often includes dealing with debt, filing bankruptcy can actually help to resolve asset-related issues.

On the other hand, filing bankruptcy together can require the cooperation of both spouses. On spouse might have most of the debt in his or her name, while the other is debt free for the most part. In either of these cases, it might be better to file for divorce first, and then handle bankruptcy later if it is still needed.

The Right Lawyer for the Job

Whether you file for divorce or bankruptcy first will determine how much time and money you end up investing in the process. In many cases, it will also have a major effect on the final outcome. To make matters more complicated, many attorneys will refuse to represent both divorcees due to the resulting conflict of interest.

Before making any final decisions, it’s important to talk to a competent legal professional who can help identify your options.