In a lot of cases, these two unfortunate events come at the same time, as a result of one another. Whether it was the poor financial situation which led to the marital problems, or the divorce was too expensive to financially recover, they seem to be interlinked.
However, experts at Chang & Diamond, APC propose an interesting solution if the divorce and bankruptcy are inevitable – file for a joint bankruptcy before you file for divorce.
Naturally, this is not a viable option for everyone, but in some cases, it can save you a lot of money and hassle in an already difficult period of time. Here are the details.
How to File
Filing for a joint bankruptcy is pretty much the same as filing for an individual one or a commercial one. The only major difference is that you will need to provide both of your bank statements to the court.
This is not a new thing; actually, it’s been around for a very long time and it helps keep the costs down because it costs exactly the same as filing individually.
What’s more, your attorney fees will also be lower since you will only need one attorney and only have one case.
Of course, that means that you will have to work together with your soon-to-be former spouse which is not always possible, but if it is, you really need to consider that as an option.
Do You Have to File Together?
Married couples do not have to file for bankruptcy together, whether they are divorcing in the near future or not. If only one spouse needs this kind of protection, it makes more sense to go for the individual filing, rather than joint.
Another situation when joint filing is not the best option is if you are above the median wealth level in your state. In that case, you are likely to be denied bankruptcy while you have your joint wealth.
However, after the divorce, your wealth may decrease enough so that you can file for bankruptcy individually.
In some states, if you file for bankruptcy jointly, you may be allowed to double the amount of wealth which is exempt from being sold off. However, in California, that is not the case, so don’t
Chapter 7 Bankruptcy
This kind of bankruptcy is a far quicker issue than Chapter 13. It is typically used to discharge all of your unsecured debt, such as credit cards or medical bills by selling off all of your non-exempt property such as second homes, second vehicles, and similar things.
The benefit of Chapter 7 is that it can be done in a matter of a few months, which means that you can go through with the divorce soon afterward.
Chapter 13
On the other hand, Chapter 13 is not discharging your debt so much as it is reprograming it. That’s why Chapter 13 bankruptcy lasts for three up to five years.
Even though this type of bankruptcy doesn’t involve selling off your property, it does require a long-term commitment. If you were planning to get divorced soon, this might not be the right course of action.
Learn more about this type of bankruptcy in this article https://www.thebklawyers.com/san-diego-chapter-13-bankruptcy-lawyers/.
If you are filing for bankruptcy jointly, but plan to divorce as soon as the process is done, you need to be sure that you reach an understanding with the other person about what you each get to keep and what you want to be exempt from the bankruptcy.
It would also be a good idea to tell your bankruptcy attorney what your plans are, so that they can help you manage your case better and prepare the documentation for the divorce proceedings as well.