Still trying to decide whether you should initiate bankruptcy or divorce first? If you need help deciding whether to file for bankruptcy or divorce first, careful planning can help simplify both processes and save you money.
Divorce can be tough emotionally and financially, and the financial aspect often links divorce and bankruptcy.
Some individuals may have experienced financial difficulties early on, which could have affected the marriage. Others may need help to handle the expensive divorce obligations.
Regardless of the circumstances, bankruptcy offers a solution to eliminate burdensome debts, making it easier for both parties to rebuild their lives.
Whether to file for bankruptcy before or after divorce depends on location, the extent of your assets and debts, and the type of bankruptcy you intend to pursue.
Should You File for Bankruptcy or Divorce First?
Simultaneously filing for divorce and bankruptcy offers numerous advantages, but evaluating these benefits individually is crucial since everyone’s financial situation is unique.
Filing A Joint Bankruptcy
Did you know that simultaneously filing for bankruptcy and divorce can expedite the process? In most cases, the bankruptcy case is given priority over the divorce case. However, both parties can file for a bankruptcy case by filing for bankruptcy before or alongside a divorce.
Submitting a Joint Petition Together
Imagine a bankruptcy case as a process that begins when someone, like a person, a married couple, or a business, fills out special paperwork and submits it to the court.
When a married couple decides to file for bankruptcy together, they fill out a “joint petition.” This joint petition includes all the essential financial information of both spouses in one set of documents.
Divorcing couples often file for bankruptcy together because it can be more efficient. There are a couple of benefits to doing this:
First, when the bankruptcy is approved, it helps eliminate (or “wipe out”) the debts both spouses have. There will be fewer issues to decide in the divorce court, making things simpler.
Second, legal fees are usually cheaper to file for bankruptcy together as a married couple than to file separately. As a result, they can save money on the overall process.
So, filing for bankruptcy together before getting a divorce can make things easier and less expensive for the couple.
Bankruptcy Before Divorce
Sometimes, both spouses may find it easier to qualify for bankruptcy after the divorce process. This could be because their combined income has decreased significantly, making them eligible for certain types of bankruptcy.
In such instances, it might be more advantageous for each spouse to file for personal bankruptcy separately after finalizing the divorce.
Bankruptcy After Divorce
Sometimes, both spouses may find it easier to qualify for bankruptcy after the divorce. This could be because their combined income has decreased significantly, making them eligible for certain types of bankruptcy.
In such instances, it might be more advantageous for each spouse to file for bankruptcy separately after finalizing the divorce. Then, after the divorce, they can file for either Chapter 7 or Chapter 13 bankruptcy.
In Chapter 7 bankruptcy, most or all of the debts can be wiped out, giving them a fresh start after the marriage ends. This means they won’t have to worry about those debts anymore. However, the divorce judgment can require one of the spouses to remain liable on the debt, so the bankruptcy filing will not discharge that obligation owed on behalf of the ex-spouse.
In Chapter 13 bankruptcy, the unsecured debts (like credit card bills) can be eliminated, just like in Chapter 7. But it also helps them catch up on any secured debts they might be behind on, like a house or a car. Again, they can do this over three to five years, making it more manageable.
To make sure they make the right decisions, it’s crucial to have the help of an attorney who understands their specific situation. This attorney can guide them through the process and help them choose what’s best for them in the long run.
Chapter 7 vs. Chapter 13 Bankruptcy and Divorce
A Chapter 7 or Chapter 13 bankruptcy can offer debt relief and the opportunity for a fresh financial start.
While every situation is different, filing a joint Chapter 7 bankruptcy before initiating divorce proceedings is recommended, as it is a quicker and fairer option. However, it’s important to note that bankruptcy may only sometimes be optimal for reducing or eliminating debt.
Factors such as the nature and amount of the debt, individual financial circumstances, and other legal considerations should be carefully evaluated before deciding on the best course of action.
Discharging Marital Debt In Michigan
In Michigan, in a divorce settlement, the division of marital debt follows a principle of equal division. Therefore, any assets, property, medical bills, and debts accumulated during the marriage are typically divided equally between the spouses.
It doesn’t matter if the debt was acquired individually or jointly, as Michigan divorce laws treat all debts incurred during the marriage similarly.
Imagine a married couple who decides to get a divorce. A critical aspect of a divorce is the division of debt. In most cases, the debt is divided evenly between two spouses, meaning each person is responsible for paying approximately half of the total debt. This ensures a fair distribution.
However, there are situations where a judge may determine that an alternative debt division is more appropriate and fair. For example, the judge considers various factors, such as each spouse’s financial situation, earning capacity, and other relevant circumstances. Based on these considerations, the judge may decide to divide the debt in a different manner that is deemed fair to both parties.
It’s important to understand that the ultimate goal is to achieve a fair and equitable distribution of debt, considering the specific circumstances of the couple involved.
The goal of the law is to divide a couple’s assets equally in many cases. However, certain factors can lead the court to provide relief to one spouse:
- If a spouse has significantly more money than the other, the court may make adjustments to ensure a fair division of assets. This prevents one spouse from being financially disadvantaged after the divorce.
- If a spouse is responsible for the divorce, the court may consider this when dividing the assets. The spouse who is not at fault may receive a more favorable distribution to compensate for any negative impact caused by the divorce.
- If a spouse receives more property that still requires payments, the court may adjust the division of assets to account for these pending payments. This ensures that both spouses share the financial responsibility for any outstanding obligations.
- If a spouse has accumulated significantly higher debt than the other, the court may consider this during asset division. The spouse with more debt may receive a smaller share of the assets to balance the financial burden.
In these situations, the court aims to tailor the division of assets to the specific circumstances and ensure a fair outcome for both parties involved in the divorce.
The Myth That Filing Bankruptcy And Divorce Is A Lot Of Work
Contrary to popular belief, the idea that filing for bankruptcy and going through a divorce is an overwhelming and burdensome process is often a misconception. While bankruptcy and divorce involve legal procedures and require careful consideration, they can be managed effectively with the right approach and guidance.
Although each situation is unique, with its complexities and challenges, it’s essential to approach bankruptcy and divorce with a realistic perspective. By seeking the help of experienced professionals such as bankruptcy attorneys and divorce lawyers, individuals can navigate these processes more smoothly.
These legal experts have the knowledge and expertise to guide individuals through the necessary steps, handle paperwork, and ensure compliance with legal requirements. They can simplify complex procedures, provide valuable advice, and advocate for their client’s best interests.
Open communication, cooperation, and understanding between both parties can significantly contribute to streamlining the process. Individuals can find amicable resolutions and minimize unnecessary conflict and stress by working together and maintaining a respectful approach.
It’s important to remember that while filing for bankruptcy and going through a divorce may involve some effort and time, managing both processes efficiently with the proper support and a positive mindset is possible.
How A Bankruptcy Lawyer Can Help With Financial Troubles
Whether you are deciding on a repayment plan for your credit card debt while divorcing or deciding what to do with the assets acquired during your marriage with spousal support for the best interest of both of you, whether you know what debt relief options you have in bankruptcy or thinking about invoking bankruptcy protection and filing a divorce simultaneously, hire an attorney to be by your side and help you navigate through these difficult times.