Bankruptcy or Divorce—Which is the Chicken and Which the Egg?

Which Should You Do First—File for Bankruptcy or Finalize Your Divorce?

Far too often, the underlying cause of divorce is financial difficulty. Even if financial problems are not the cause of divorce, they can arise when you no longer have two incomes to pay for your lifestyle. If you are considering filing for divorce, or if you know that your spouse plans to seek a divorce, you may see a personal bankruptcy filing as inevitable. So a key question can center on the timing and order of these proceedings. Should you file for bankruptcy first? If so, what will be the impact on your divorce and on your soon-to-be ex-spouse?

The Impact of Filing Your Divorce Complaint First

If you finalize your divorce first, the assumption is that all property will have been divided, i.e., that you no longer own any assets or have any debts jointly. Accordingly, your subsequent bankruptcy filing will likely have little or no impact on your ex-spouse. In addition, child support or alimony arrearages cannot be discharged in a bankruptcy proceeding, so you cannot extinguish your obligation to an ex-spouse through bankruptcy.

What to Expect if You File Your Bankruptcy Petition First

If you are married when you file for bankruptcy, you can choose to file bankruptcy individually or jointly. If you file individually, you will receive the protections afforded under the law—prohibition of calls, letters or legal action by creditors—but your spouse will not. Because your spouse won’t be protected, they may be subjected to harassment by creditors, and may be liable for the full amount of the debt. If you file jointly, you will both be protected, but you will both take a hit on your personal credit rating.

A Chapter 7 filing prior to a divorce can simplify the divorce proceedings, as most or all property will be sold, and most or all debts will be discharged. If you want to repay your creditors under Chapter 13, you will likely be better off waiting until after your divorce, as the process can last three to five years.

Contact Heath, TX Bankruptcy Attorney Carrie Weir

I provide a free initial consultation to anyone with questions or concerns regarding a bankruptcy filing. Contact my office by e-mail or call me at 972-772-3083 for a private meeting. With offices in Rockwall, Texas, I represent clients in Heath, Greenville, Lavon, Wylie, Mesquite and Rowlett.