According to a Ramsey Solutions survey performed in 2018, money and financial difficulties are the leading causes of marital conflict. Financial hardship is the second most significant reason for divorce, behind adultery. According to these figures, many couples contemplating divorce may also be experiencing financial difficulties.
Timing is critical if you want to file for divorce and bankruptcy simultaneously. Whether you’re considering filing for bankruptcy before, during, or after your divorce, an experienced Indianapolis bankruptcy lawyer can help you understand your alternatives and assess the benefits and drawbacks.
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Things to Consider Before Getting a Divorce
There are various benefits to declaring bankruptcy before a divorce. If you file for bankruptcy before your spouse, you may be able to split the bankruptcy attorney’s expenses. Bankruptcy filings can also help with property division following a divorce. In many divorce proceedings, the court divides the couple’s assets and obligations. You and your spouse are no longer liable for your unsecured debts if you and your spouse win a discharge.
Furthermore, if a court orders your husband to pay a shared debt, the creditor is unaffected by the verdict. Creditors who are not divorced have the right to collect on you or your spouse. Unsecured debt that hasn’t been paid through bankruptcy is still collectible, no matter the family court rules.
For many reasons, declaring bankruptcy during a divorce is the wrong choice. There will be a delay because your divorce and bankruptcy proceedings are interwoven. Non-exempt assets form part of the bankruptcy estate and are not exempt.
All unsecured debts, such as credit card debt and medical expenses, are discharged in Chapter 7 bankruptcy. Typically, Chapter 7 bankruptcy results in debt relief within a few months of filing. This was done before the divorce.
A Chapter 13 bankruptcy, on the other hand, can take anywhere from three to five years to complete, depending on the amount of debt owed. Because Chapter 13 bankruptcy can take a long time, you should apply after your divorce is over.
If you and your spouse don’t get along, postponing your bankruptcy filing until after your divorce may be advantageous. This may enable you to declare bankruptcy without alerting your spouse. If your combined income is too high to qualify for Chapter 7 bankruptcy, waiting to file until after your divorce is over may speed up the process of getting rid of your debts.
Depending on your income, you may file for Chapter 7 bankruptcy before or after your divorce. If you file jointly, you must report your total income. Even if you meet the Chapter 7 means test, you may be disqualified if your overall income is exorbitant. This could happen even if both spouses’ salaries are insufficient to qualify them jointly.
In the event of a divorce, filing for bankruptcy jointly facilitates property division. Check if appropriate exemptions are allowed to protect any common property before filing a joint bankruptcy. In several states, the exemption amounts are doubled if you file jointly.
During a divorce, determining who is responsible for the couple’s debts can be costly and time-consuming. Even if the court orders one spouse to pay the debt as part of a divorce settlement, the other spouse remains accountable. What if your ex-husband demanded that you pay a joint credit card bill? Even if he defaults or declares bankruptcy, you are still liable for the debt. If you pay the bill, your ex-husband must compensate you because he violated the terms of your divorce agreement.
What to Do Before Starting the Process
A bankruptcy case is initiated when an individual, a married couple, or a corporation files formal bankruptcy papers with the court. When a married couple files jointly, they submit a “joint petition” that includes financial information from both sides.
To save time and money, divorcing spouses frequently file their paperwork jointly. The following advantages of filing a joint petition are:
- Qualifying debt will be discharged, removing problems in divorce court, and
- Filing a joint petition is less expensive than filing a single petition.
Married couples, on the other hand, are exempt from filing jointly. Filing a solo bankruptcy petition may make sense if one of the spouses requires emergency bankruptcy protection. Due to their lower wages, both spouses may find it easier to apply for bankruptcy after a divorce. Many couples find that filing for divorce together makes the process more manageable when it is possible.
How Much Does Divorce Really Cost?
Individual bankruptcy filing fees are the same as joint bankruptcy filing fees, regardless of how many people are involved. If you initially file a joint bankruptcy with your husband, you may be able to save a large amount of money on your divorce attorney’s fees. Furthermore, filing a consolidated bankruptcy rather than two individual ones can save you money because the legal costs are likely lower. If you hire the same bankruptcy attorney for your divorce and bankruptcy, there may be a conflict of interest, which you should inform them of. Debt and property split issues may be easier to deal with if you file for bankruptcy before you split up, saving money on your divorce.
An Indianapolis bankruptcy lawyer is an expert in assisting clients who cannot satisfy their financial commitments. When it comes to divorce and bankruptcy, an attorney like you’ll find at Trapp Legal can help you safeguard your legal rights and prevent being held liable for a disproportionate share of your ex-spouse’s debt.