What to Do When Divorce Causes Bankruptcy

If a person is struggling financially and then gets a divorce, this is only going to make matters worse. In a divorce, assets are split in half. One household becomes two. A person needs more money to get by at a time when their assets have been reduced. Plus, divorces are not cheap, costing, on average, around $15,000.

Because of this, it is not uncommon for couples to file for divorce and then file for bankruptcy.

A divorce comes with wide-ranging consequences. It affects your assets, debts, expenses, and sometimes even your income, and these are all key elements of a bankruptcy case. Because of this, a divorce can greatly impact your bankruptcy.

You can still file for bankruptcy after a divorce, but there will be some differences. For example, you will want to have your divorce decree on hand. This document contains information that is important for your bankruptcy case. You will need to understand which parts of your divorce decree affect your bankruptcy and what to include in your bankruptcy forms.

Also, you need to consider the debt that was brought about by your divorce. You may now have alimony and child support payments, but those cannot be discharged. However, attorney fees that you incurred during the divorce may be discharged.

Things can be complicated before, during, or after a divorce. Here is a look at the process for filing for bankruptcy.

Assess Your Financial Situation

Before making any legal decisions, gather all your financial documents, including debts, income statements, credit reports, and assets. Identify whether your debts are primarily joint or separate, as this will affect how they are handled in the bankruptcy proceedings. Consider whether you have the means to repay debts through restructuring (a Chapter 13 bankruptcy) or if liquidation (Chapter 7 bankruptcy) is the only viable option.

Consult Professionals

A bankruptcy attorney can help determine whether Chapter 7 (which eliminates unsecured debts like credit cards and medical bills) or Chapter 13 (which sets up a repayment plan) is the right path. If you’re still in the throes of a divorce, your divorce attorney can clarify how bankruptcy may impact asset division, alimony, and child support obligations. It may be helpful to get a financial advisor to assist with budgeting and planning for financial recovery post-bankruptcy.

Decide on Timing

If you and your spouse are on relatively good terms, filing bankruptcy before the divorce can simplify financial matters, as joint debts can be discharged together. However, filing after the divorce might be necessary if one spouse takes on more debt post-divorce or if legal disputes make joint filing unfeasible.

Contact Us Today

Bankruptcy and divorce often go hand in hand, but it is important to get the timing right. Filing for bankruptcy at the wrong time can make the process more complicated.

Bankruptcy can help you get a fresh start after a divorce. South Florida bankruptcy attorney Brian K. McMahon, P.A. can assess your situation and guide you through the next steps. Call (561) 658-1789 or fill out the online form to schedule a consultation today. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.