I need both a divorce and bankruptcy. Which should come first?

On Behalf of | Jun 17, 2024 | Bankruptcy

Often, marital problems and money problems go hand and hand. An Essex County resident can easily find themselves needing both a divorce and a bankruptcy at the same time.

Both divorces and bankruptcies are complicated legal matters. Although there are always exceptions, it is usually best to handle these types of cases one at a time.

Whether and exactly when to file these cases will depend a lot on a northern New Jersey resident’s situation, but there are some general principles a person can consider when trying to figure out whether to file bankruptcy or divorce first.

Filing bankruptcy before divorcing is often, but not always, the better option

  • To file bankruptcy first, the spouses will have to agree to put off finalizing their divorce and will have to cooperate in the bankruptcy process. If the spouses cannot agree, or if there is a general lack of trust between them, it may be better to divorce first and then file bankruptcy separately.
  • Filing bankruptcy together can save both costs and attorney fees.
  • Filing bankruptcy together can give the couple more protection from their debt. In a Chapter 7, for example, they can take advantage of additional property exemptions which can keep their assets from being sold to pay off debt.
  • On the other hand, trying to file together means the bankruptcy court will look at both spouses’ incomes. Their combined income may be too high to qualify for Chapter 7, meaning they will have to file a Chapter 13 repayment plan, which will last from 3 to 5 years.
  • Once a bankruptcy is done, many of the couple’s debts should be discharged. This can make dividing up assets and debts in the ensuing divorce easier.
  • If one of the spouses has most of the debts in their sole name, it may make more sense for that spouse to file bankruptcy after the divorce. As a word of warning, though, a bankruptcy will not necessarily discharge debts related to a divorce, and it certainly will not discharge child support. A person should review their divorce decree and check with their attorney before filing for bankruptcy.

Filing bankruptcy before divorcing is often, but not always, a good choice, provided that the spouses can cooperate. A person facing marital and financial problems should consider their options carefully.

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