This topic is intense! I will try to be as much lucid as possible in explaining the situations through a written content! Believe it or not, this truly requires a proper face to face conversation!
But, whatever, let’s begin!
Two things to keep in mind if you plan for bankruptcy and divorce together:
a Avoid filing bankruptcy chapter 13, when facing divorce:
This is the most important thing you got to consider. Chapter 13 bankruptcy and divorce is the last thing you want to go for.
First of all, chapter 13 is a very lengthy process, where you will enter into a mutual payment format with your creditors. There is no liquidation of any assets, and only certain low priority debts get washed away.
It takes minimum 3 to 4 years to complete this whole chapter 13 case. One by one you pay off the creditors, and finally become debt free!
But! There will be an automatic stay imposed on you, where no assets can be touched or inquired about by a third party. This means, your divorce case (property division) won’t take effect during the automatic stay.
In simple words, no property can be divided or mutually understood between you and your spouse, during this period!
Don’t expect a proper divorce case proceeding, if you file chapter 13 bankruptcy.
Even if you still feel that you want to file chapter 13, then first get over with divorce. Settle the matter once and for all. Don’t keep any liability on your head. Once the divorce is done, plan to file the chapter 13!
Remember, never file a chapter 13 jointly, if ultimately you are getting divorced, and unless your spouse is too cooperative even after separation!
Many financial advisors often say that joint filing helps you to qualify for double exemptions. But, hey, you want a happy life, isn’t it? Moreover, this is relevant under chapter 7 bankruptcy which we will discuss next!
First, get done with the separation, and then start with chapter 13 by filing single!
Trust us! You will have mental peace, and the whole court process will be simple and straightforward!
b File chapter 7 first and then go for divorce:
If you plan to wash away your debts first, as creditors or collectors are now infiltrating your relationship and personal life, then chapter 7 bankruptcy is best suitable for you.
However, you need to file chapter 7 first, then divorce!
Talk to your spouse to file jointly. You will get more exemptions, and save more money, unlike with chapter 13, as told earlier!
Once you file chapter 7, your assets are going to get divided. High chances are, if you file bankruptcy jointly, then you can have more exemptions on your primary residence and other valuable assets.
This will reduce future strifes with your spouse, during the divorce case property division!
After you are done with paying off debts, it’s time to tackle the whole relationship thing!
What complication can arise due to the bankruptcy and divorce clash? And, what pieces of advice to follow:
Several mind-bending situations might come into play when you have both bankruptcy and divorce over your head!
The biggest problem will be around two2 things, namely, property mutualization and mental stress!
Our in-house attorneys at Oak View Law Group suggest to have one personal advocate to monitor the case, and taking help of a financial therapist when applicable!
If bankruptcy and divorce are filed together, then during property division, there will be a war of advocates.
The divorce advocates will claim properties for the division, while the bankruptcy advocates will aim to sell as many assets possible to pay off debts! Are you understanding the depth of this situation?!
Look out for such complications! Things will get tough and expect to suffer emotional breakdowns, any time!
But, try to have patience!
Enter the battlefield with a mental preparation that you will lose everything! Your properties, your partner, and what not!
Therefore, wait!! Let the advocates fight! Don’t take much pressure! Let them do whatever they want with your properties! The storm will pass away!
