What You Need to Know About
Bankruptcy and Divorce
July 8, 2022
Financial issues can cause heated arguments between spouses and may even lead to divorce. Often, spouses on the brink of divorce experience financial problems that necessitate filing for bankruptcy. “Should I file for bankruptcy before or after my divorce?” is something that many people wonder.
If you are planning to get a divorce, the timing of your bankruptcy filing will be very important. When deciding whether to file for bankruptcy or divorce first, it is vital to understand your unique circumstances. It may be necessary to consult with a skilled bankruptcy attorney to review your situation and determine the best approach for your specific case.
As a bankruptcy attorney with decades of experience at the Law Office of Scott N. Tisevich, Scott N. Tisevich, Attorney at Law provides debt relief assistance to clients in Reno, Carson City, and Las Vegas, Nevada, as well as throughout the state, including Story, Churchill, Lyon, and Douglas counties.
Bankruptcy & Divorce:
Filing Jointly vs. Filing Separately
Before filing for divorce, a couple needs to consider whether they should file a petition for bankruptcy jointly or separately. Each approach has its pros and cons. If the couple has significant joint debt, seeking debt relief through a bankruptcy filing can eliminate or reduce the debt before initiating the divorce process.
As its name implies, a joint filing for bankruptcy contains the financial information of both spouses. Filing jointly can discharge the qualifying debt of both spouses, eliminating the need to divide those debts during divorce proceedings. In addition, one of the main advantages of filing for bankruptcy together with your spouse is that it costs less than filing separately.
However, if spouses are not on good terms to file for bankruptcy together or they wish to file separately for some other reason, there is no obligation to file jointly. Consider discussing your unique case with an experienced bankruptcy attorney to determine if you should file jointly or separately.
Bankruptcy vs. Divorce: Which to File First?
The answer to the question “Which to file first?” depends on several factors, including where spouses live, the amount of debt they have, and the type of bankruptcy they would be filing.
Filing for bankruptcy first. Generally, married couples choose to file for bankruptcy before filing for divorce when they have significant joint debt. Eliminating or reducing joint debts before a divorce can make the process of dividing debts in divorce less complicated. In addition, filing for bankruptcy when the spouses are still married provides them with the opportunity to file jointly, which is usually less costly than filing separately.
Filing for divorce first. If you finalize your divorce before filing for bankruptcy, you will not be able to file jointly with your ex-spouse. It means that each spouse will have to pay more in legal and filing fees. Filing for divorce first may also be a viable option if the spouses want to file for Chapter 7 bankruptcy, but their combined income makes them ineligible to file under this chapter.
There are many factors that come into play when deciding whether you should file for bankruptcy or divorce first. Those factors include the amount and types of joint debts, the marital assets that would be subject to division, the spouses’ ability to get along, and many others. A knowledgeable bankruptcy attorney can evaluate your particular situation to help you understand your best option.
Asset Division & Discharge of Debt
If you file for bankruptcy before your divorce, some of your debts and assets may no longer be subject to division during divorce proceedings. Alternatively, filing for bankruptcy while your divorce is ongoing may stop the asset division portion of the divorce process until after the bankruptcy case is resolved.
When filing for bankruptcy after a divorce, the divorce decree can also affect asset division and discharge of debt. Another thing to keep in mind is that creditors may refuse to follow orders issued by family courts. It means that even if you and your spouse get a divorce and your spouse was ordered to pay a joint debt, creditors may still go after you. Filing for bankruptcy, on the other hand, would invoke the automatic stay and stop collection actions from creditors.
Turn to Knowledgeable Counsel
If you are unsure whether you should file for bankruptcy before a divorce or wait until your divorce is final before filing under Chapter 7 or Chapter 13 bankruptcy, seek legal counsel from Scott N. Tisevich, Attorney at Law. With an office in Reno, Nevada, Scott N. Tisevich helps clients find debt relief and address other bankruptcy-related matters throughout the state. Get the guidance you need by contacting the Law Office of Scott N. Tisevich. He serves clients in Reno, Carson City, and Las Vegas, Nevada, including the counties of Churchill, Lyon, Story, and Douglas.