Dealing with a divorce or bankruptcy can be a life-changing event for any person. But facing these issues at the same time can be especially challenging. Many times, individuals will feel stressed out and overwhelmed. If you want to know about divorce and bankruptcy, there are a few tips that many people have found helpful as they navigate through these complex situations. If you have questions about how to manage the legal processes of divorce and bankruptcy at the same time, please consider scheduling a consultation with the Colorado Divorce Law Group by calling (720) 593-6442.
According to the United States Census Bureau, divorce rates have declined since 2009. However, couples are still ending their unions, a process which often involves considerable financial as well as emotional stress. As a result, some divorcing partners find themselves filing for divorce and bankruptcy in rapid succession. Deciding whether to file for bankruptcy before or after getting a divorce can be a complex issue. Unfortunately, there is no correct answer that will apply in all cases. The best option depends on a person’s unique financial situation and priorities.
It may be better to file for bankruptcy in a few situations before getting a divorce. With some options, individuals can discharge debts. Many times, those same debts would be divided during the divorce process. Additionally, these exemptions may protect certain assets from being liquidated during the bankruptcy process, allowing both spouses to retain their property during the divorce.
Sometimes, it might be preferable to postpone declaring bankruptcy until after the divorce. For example, there may be salary restrictions for eligibility for spouses who want to file for Chapter 7 bankruptcy. Because they petition jointly while still legally married, their combined income could prevent them from filing for Chapter 7 bankruptcy. In those cases, waiting until the divorce is finalized could be an option. At that time, both parties’ income levels will be lower, allowing them to qualify for Chapter 7 bankruptcy and discharging more debt.
The best decision on whether to file for bankruptcy before vs. after divorce is often highly dependent on a person’s individual circumstances. Divorcing partners contemplating bankruptcy may find it helpful to consult with a qualified attorney to evaluate their financial situation and help them plan for the various factors involved in their unique situation. Reach to out Colorado Divorce Law Group to learn more about divorce and bankruptcy.
When considering bankruptcy after a divorce, couples need to understand how the process works and how it can impact their individual financial situations. The type of bankruptcy can also make a difference. According to the United States Department of Justice, there are several types of bankruptcy chapters, such as:
Chapter 7 and Chapter 13 bankruptcy are especially common options for individuals who are recently divorced or currently in the process of divorcing.
For many, Chapter 7 bankruptcy is typically the most common type and can discharge most unsecured debts, such as credit card debt or medical bills. However, some individuals may have significant assets that cannot be exempted, which means they could be liquidated to pay off their creditors. Before filing for bankruptcy, individuals should evaluate their assets and exemptions to find the suitable option for them.
Chapter 13 bankruptcy involves a repayment plan lasting three to five years, allowing individuals to keep most of their assets. People often choose this option if they have significant assets that they want to protect. However, the person will need to have regular income to make the payments on the repayment plan. For those ordered to pay support or alimony as part of the divorce settlement, these obligations generally cannot be discharged through bankruptcy, so those financial burdens. However, filing for bankruptcy can still help alleviate some of the financial pressure by discharging other debts, allowing the individuals to better meet their support obligations.
Many people want to know whether filing for bankruptcy and divorce will affect their credit scores. As the couple separates cash, investments, or property, there could be a decrease in income and other forms of assets; those changes can affect each partner’s individual credit score after the divorce.
A bankruptcy will remain on a credit report for up to 10 years. During that time, it can be difficult for a person to obtain credit in the future. However, for those struggling with overwhelming debt, bankruptcy may be necessary to help them get back on track financially.
Whether or not a divorcing partner’s bankruptcy can hurt the other spouse’s financial situation is a complex issue that will depend on several factors. If a couple files for bankruptcy jointly, both parties will necessarily be impacted. The combined assets and debts of the couple will be considered in the proceedings, with any non-exempt assets sold to pay off creditors. This could impact the financial situation of both spouses if they have significant assets that may be liquidated. On the other hand, if only one spouse files for bankruptcy individually, only their assets and debts will be considered. The filing will not directly impact the other spouse’s assets and debts.
In community property states, both spouses are generally responsible for debts incurred during the marriage, no matter who incurred the debt. In these states, the non-filing spouse’s credit may be negatively impacted when the filing spouse discharges joint debts. Often, creditors may seek to collect any outstanding debts from the non-filing spouse. For couples not in a community property state, the bankruptcy filing may not directly impact the non-filing spouse’s credit. However, if one spouse is filing for bankruptcy and the other spouse is a co-signer on any debts, the co-signing spouse may still be liable for the remaining balance even after the debts are discharged. Unfortunately, that could impact their credit score and financial situation.
Considering divorce and bankruptcy simultaneously is a challenging situation that requires careful consideration. While the decision to divorce is often emotionally charged, couples will want to approach it with a level head and a clear understanding of the financial consequences. Bankruptcy may offer a way to alleviate some of the financial strain caused by divorce, but it is not a decision to be made lightly. Seeking the advice of an experienced attorney may help you navigate this difficult process and make informed decisions that protect your interests and financial future. Taking a proactive approach to managing your finances during both divorce and bankruptcy can help you move forward with greater confidence and stability. To learn more about these two processes, consider scheduling a consultation with the Colorado Divorce Law Group by calling (720) 593-6442.