Divorce and financial struggles often go hand in hand. When you face divorce and the prospect of bankruptcy at the same time, you may not know what is the right course to take. Should you file together or separately, before or after the marriage ends?
The answers depend on your personal circumstances, so take the following into consideration to help you navigate the situation.
When to file
If you both could benefit from filing for bankruptcy, you may want to do so together before you start your divorce. Filing for bankruptcy comes with court and legal fees, so doing it together can save you some money. It can also prevent one of you from being responsible for most of the marital debt, as the division of debt is part of the divorce process.
In cases where your spouse acquired debt before the marriage or only in his or her name, you may want to get a divorce first and close all joint accounts so that creditors do not try to get you to pay off your spouse’s debt. Filing for both divorce and bankruptcy at the same time is usually not recommended.
How to file
Chapter 7 bankruptcy eliminates most debts, whereas Chapter 13 reduces the quantity you owe and involves a repayment plan. Whether you go with Chapter 7 or Chapter 13 depends on your income. Chapter 7 requires passing a means test that shows your income is below a certain level. If you make too much money, you will have to go with Chapter 13.
Your joint income may put you above the limit for a Chapter 7, even if you file on your own while still married. Divorcing first may help you qualify based on your individual income.
There is no one-size-fits-all approach when it comes to both your marriage and your debt. However, when you have a clear idea of your needs and goals, you can find an effective solution.