Bankruptcy Lawyer Bryan W. Stone answers the question: “What are my alternatives to bankruptcy?”
Everyone knows that financial problems and marital problems often go hand-in-hand. If you’re suffering from both issues and are considering bankruptcy, you may be confused about the best way to move forward. On the one hand, you could file for bankruptcy jointly, pre-divorce, and get the financial issues dealt with prior to the divorce. On the other, you could wait to turn the page on your relationship before digging into financial trouble. Which approach is best? As is so often the case, it depends on a variety of factors. To learn more, keep reading.
The first factor that should be considered when deciding whether to file for bankruptcy or divorce first, is the type of bankruptcy you intend to pursue. If you’re interested in a Chapter 7, it may be a good idea to file before you divorce. This way, you and your spouse are able to eliminate all jointly held debts in one swoop, taking care of all joint liabilities and moving towards divorce with a clean financial slate.
If you’re interested in a Chapter 13 bankruptcy, divorcing first may be the best approach. The reason is that if you divorce while in the midst of a Chapter 13 repayment plan, you will need to either have the bankruptcy closed or in some way separated from your spouse. It’s generally not a good idea to consider tying yourself financially, in the form of joint payments, to your ex for between three and five years into the future. Thus, if you intend to pursue a Chapter 13, you are likely best to do so on your own.
Another issue to consider is your household income. If you file jointly, your joint income allows you to split the costs associated with bankruptcy, including hiring the attorney and paying court fees. Doing this post-divorce will mean you’re responsible for all the costs. Income also matters if you’re interested in a Chapter 7. If you file pre-divorce, the court will consider your household income. Jointly, you may not meet the means test, while on your own a Chapter 7 may be possible. Keep this in mind before deciding on a path forward.
Finally, you need to consider the health of your relationship. Are you and your partner at each other’s throats? If so, definitely wait to file until after your divorce is over. If you try and file jointly, you are putting your bankruptcy into the hands of someone who may not have your best interest at heart. You’ll need to depend on this person to share information, attend hearings and generally cooperate. If you get along well and are working towards a common goal, then filing jointly prior to divorce may work. If not, and you act more like adversaries than allies, it is probably better to go through the bankruptcy alone.
In the end, what you don’t want is to try and do both at the same time. The two processes are far too interrelated to be dealt with simultaneously given that things like income qualification or property distribution all depend on your marital status. You’ll need to deal with one completely before moving ahead with the other.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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