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Should I File for Bankruptcy before Divorce?
October 20, 2015
It depends on your situation, your needs, the type of bankruptcy case you want to pursue and your goals. We’ll dive deeper into this answer below.
Benefits of Filing for Bankruptcy before Divorce
When bankruptcy and divorce may be necessary to resolve your financial and marital issues, filing for bankruptcy before moving forward with divorce can be better when:
- You want to resolve the debt issues prior to divorce – If you file for bankruptcy before divorce, your financial issues will largely be resolved by the time you move forward with the divorce process. While this can make for a faster divorce (because the property division process will likely be far easier to get through), it can also result in a cheaper divorce (as shorter cases with less issues tend to cost less to resolve).
- You and your spouse want to take advantage of doubled exemptions – If you and your partner file for bankruptcy together, you both may be able to protect more of your assets via doubled bankruptcy exemptions (such as the doubled exemption for motor vehicles). This can end up meaning that you are able to retain more property via a joint bankruptcy case (as opposed to waiting to file alone following divorce).
Potential Downsides of Filing for Bankruptcy First
Although there can be some benefits to filing for bankruptcy before divorce, this may not be the best move for everyone, especially if or when:
- Joint petitioners won’t qualify for Chapter 7 bankruptcy – To qualify for Chapter 7, bankruptcy petitioners have to pass a means test, which basically evaluates their income versus their debt and expenses. Joint petitioners’ income will be added together, and this can end up causing them to fail the means test (as the combined income can exceed the means test limits).
- Having to work with an ex for years in a Chapter 13 case – These types of bankruptcy cases can take at least a few years to resolve, as the repayment plans for Chapter 13 cases typically span three to five years. So, if working with a spouse for the next few years to get through a Chapter 13 case does not seem feasible, then it may be better to divorce first and deal with bankruptcy subsequently.
Contact Denver Bankruptcy Lawyer Jon B. Clarke Today
When struggling with debt and looking for the best options for a financial fresh start, contact trusted Denver Bankruptcy Lawyer Jon B. Clarke. For more than 35 years, Mr. Clarke and his diligent support staff have been successfully helping our clients resolve even the most complex bankruptcy cases for individuals and businesses alike.
We encourage you to complete our Business or Consumer Debtor Analysis Form. You can also get answers from Denver Bankruptcy Attorney Jon B. Clarke by calling our firm at (303) 779-0600 or (866) 916-3950 or by emailing us using the contact form on this page.
From our offices based in Denver, Castle Rock and Greenwood village, we take pride in providing people throughout the state of Colorado with the highest quality debt relief legal services.