Tell Your Divorce Attorney If You Want to File for Bankruptcy
Dec. 16, 2016
If you are a couple considering separating, I encourage you to call my office and schedule an appointment with a divorce attorney. It is necessary to receive sound legal advice since this is a complex process that will have ramifications for years. This is especially true if you have children and custody issues at stake, you own a family business, or you have significant assets. Divorcing is not as simple as dividing everything up and moving on with your life. Depending on the complexity of your situation, the agreement made during the divorce process could influence what you can and cannot do for years to come.
Separating the Finances
One of the most challenging aspects of divorce is separating the finances. Since both parties in most relationships are contributing financially, money is going into joint accounts to pay for things like the mortgage, car payments, and utilities. With two people contributing, having money to buy groceries, gas, or go out to dinner usually isn’t much of a challenge.
However, when a couple divorces and each party is suddenly responsible for paying all living expenses without help, a comfortable financial situation can quickly turn tight. For this reason, many people consider filing for bankruptcy after the divorce. While one can certainly do so, there are some strategic advantages to filing a joint petition prior to the divorce being final. These can include:
Reduced legal fees
Ability to get rid of unsecured debts through a Chapter 7, leaving less to divide during the divorce process
Fewer debts make it easier to pay for housing expenses and basic needs
As a divorce attorney, I will need to know if the client plans on filing for bankruptcy before the divorce is final because it will influence the financial aspects of the divorce and the client’s ability to pay legal fees. Once you file, the bankruptcy trustee will have say over how your funds are spent. Thus, certain steps must be taken as a precautionary measure.
If a couple about to divorce cannot keep up with all the financial obligations, there are some alternative options to consider as well. First, the couple may want to contact the creditors directly and let them know that the couple is considering bankruptcy to see if they will work with the couple to create a reduced payment plan. Very often, the couple can have monthly payments reduced for things like credit cards and even mortgage.
While these reductions are typically only temporary, having relief for a year to three makes it possible for one to get back on his or her feet. The relief also makes the impact on one’s credit far less significant than if he or she files for bankruptcy.
Filing After Divorce
Remember that one can always file for bankruptcy individually once the equitable distribution is finalized. At that point, your spouse will not have a direct say in whether you are allowed to file; though they could lodge a complaint regarding certain joint debts. This is something that you need to discuss with your bankruptcy attorney. The point is that you do have options both during and after the divorce process for taking steps to get your debts manageable on a single income.
As your divorce attorney, I can provide you with information and advice regarding how filing for bankruptcy could impact the divorce process in general. Call today to discuss this and your case in greater detail.
NOTE: This is for informational purposes only and does not constitute legal advice.