Should I File for Divorce If I’ve Already Filed for Bankruptcy?

People often have questions regarding divorce and bankruptcy: “Should I file for divorce if I’ve already filed for bankruptcy?” and “Should I file for bankruptcy during divorce proceedings?” In all situations, divorce comes with significant financial impact for most people, and even in the most ideal of scenarios, it can be difficult to know which path is right for your needs. We can help you navigate this process.

At the Law Office of James A. Graham, our New Orleans divorce attorney works closely with you to ensure you know what is best in your situation. We look at all factors and give you insight into what to expect moving forward. Here are a few things that you need to take into consideration.

If you file for bankruptcy, will it impact your pending divorce?

One of the questions that must be considered is how a pending divorce case could be impacted if you file for bankruptcy. This applies to all situations, including both Chapter 7 and Chapter 13.

If your divorce is pending right now, filing for bankruptcy is not likely to affect the decisions made in relation to child support or child custody. That means that the court can still decide upon those decisions based on the best interests of the child.

However, if you file for bankruptcy while you are getting divorced, it will halt the proceedings because it will likely impact the division of property within the case. That is because the bankruptcy filing creates an automatic stay, which freezes any legal action against you related to your assets until decisions can be made.

In this situation, a bankruptcy trustee will be assigned to your case. The trustee has the right to sell any nonexempt property to pay back creditors if you are filing Chapter 7 bankruptcy. The trustee will navigate the process of determining which assets are property of your estate and, therefore, cannot be sold, as well as the assets that you have that should be sold.

There are many times when those assets belong to both parties, such as a vehicle that is owned by both individuals. In this situation, the trustee may require that you sell the asset if it cannot be exempted under bankruptcy law. In situations where your ex’s interest in the property is not a part of the bankruptcy estate, some of those proceeds from the sale of the property would go to your ex.

In Chapter 13 bankruptcy, your property is not sold. However, nonexempt property may impact how much of your debt you have to repay and what your repayment plan will be. The bankruptcy trustee will need to determine the value of the property you have an interest in.

Should you file for bankruptcy before or after divorce?

As noted, it is always wise to have very specific information about your case to determine what the best option is for you. However, there are a few considerations to keep in mind.

It may be beneficial to wait for after the divorce to be finalized to file for bankruptcy protection. This can be critical in situations where you and your spouse do not get along and cannot make decisions together. Filing afterward means that your spouse no longer has a say in what occurs, and that may mean you can seek to discharge your debts without waiting for them to make a decision.

Also, if the combined income of you and your spouse is too high to qualify for Chapter 7, waiting until your divorce may be better. Your income for bankruptcy then is less, and you may qualify to file now even if you did not before.

When both of you need to file for bankruptcy

There are some situations where both spouses need to file for bankruptcy after the divorce. That would mean that you would have to pay for your own bankruptcy filing and petition and all associated legal fees on your own, and your spouse would have to do the same thing.

However, if you file now before your divorce is final, you do not have to pay individual filing fees, and instead, you can file a single petition for discharge. That could mean spending less to get the same results.

What should you do in your case?

Filing for divorce means considering all of the expectations moving forward, and among those decisions is how to create a financially strong future. Bankruptcy is the logical decision for many people who are unable to make payments to meet their debt obligations. Divorce often amplifies an inability to pay those debts back. Here are a few things to do now.

Talk to an attorney

Set up a time to discuss both the bankruptcy and the divorce with an attorney. That is key to learning how either proceeding will impact you going forward. Avoid assuming that one method is best for all situations.

Determine where your spouse stands

This is really related to your ability to work through this process together. However, if the two of you plan to file bankruptcy and you qualify to file for it jointly, that may be the best decision for you. Note that there is no difference in your custody and support proceedings.

The automatic stay that goes into place when filing bankruptcy does not change the court’s decisions related to child custody or child support. Filing bankruptcy does not mean you are off the hook from paying support, in other words. However, it can impact what you pay in alimony.

The Law Office of James A. Graham is here to help you navigate this process. Knowing whether you should file for divorce or bankruptcy first is very much an individual decision based on your current and future needs. Let our attorneys give you guidance so you know exactly what to expect going forward. Call our office or submit our contact form to schedule a consultation with a divorce attorney in Slidell or New Orleans today. We serve all of South Louisiana.

Related:

• Slidell Bankruptcy Lawyers