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Bankruptcy and Divorce: When to File

Bankruptcy and Divorce: When to File

Bankruptcy and Divorce: When to File
August 28, 2023

Bankruptcy Law

The intertwining complexities of divorce and bankruptcy can be a daunting challenge for couples embarking on these unfortunate paths. The emotional turmoil, coupled with the legal intricacies, can be overwhelming.  The bankruptcy and domestic relations attorneys at Gertz & Rosen understand these hardships and are committed to providing our knowledge and support to help you navigate a wide range of legal matters, including divorce and bankruptcy, with greater peace of mind.

Understanding the Legal Complexities

When filing for bankruptcy and divorce, many legal issues arise. These include the division of assets and debts, the impact of one proceeding on the other, and the numerous options available to couples.

  • Dividing Assets and Debts – In divorce, assets and debts are typically divided between spouses. However, when bankruptcy is thrown into the mix, it complicates matters further. Bankruptcy can affect who is responsible for paying which debts and may even impact what assets are considered marital property.
  • Impact of One Proceeding on the Other – Bankruptcy and divorce proceedings can significantly impact each other. For instance, an ongoing bankruptcy can delay the finalization of a divorce, as the bankruptcy court may determine that a marital asset will be administered by a bankruptcy trustee for the benefit of creditors, rather than the husband or the wife.
  • Bankruptcy Options – A couple can consider two types of bankruptcy: Chapter 7 (liquidation) or Chapter 13 (reorganization). Each has its own implications during a divorce and should be chosen carefully, considering the couple’s unique circumstances.

The Pros and Cons: Timing Matters

One of the critical decisions couples need to make is whether to file for bankruptcy before or after the divorce.

Filing Bankruptcy Before Divorce

Pros: Filing for bankruptcy before divorce can simplify the divorce process by eliminating joint debts. In addition, if you qualify for Chapter 7 bankruptcy, you might be able to discharge your unsecured debts entirely, making the financial aspect of divorce less complicated.

Cons: On the downside, filing for bankruptcy before divorce might delay the divorce process as the bankruptcy court’s decisions could impact the division of assets.

Filing Bankruptcy After Divorce

Pros: Filing for bankruptcy after a divorce can help protect one spouse from the other’s financial troubles. It can also allow for more flexibility in filing as individuals or jointly.

Cons: However, if you choose to file after divorce, you may lose the ability to wipe out joint debts, and you may have to deal with these separately.

How a Skilled Legal Team Can Help

Navigating through the rigors of bankruptcy and divorce simultaneously can be intimidating. It is a complex process fraught with potential pitfalls, but working with a law firm that has a deep understanding of both areas of law can help.

At Gertz & Rosen, we provide experienced, comprehensive representation to guide you through challenging times. Our team of skilled attorneys is highly experienced in various practice areas, including domestic relations, bankruptcy, commercial law, real estate issues, and more. We will work tirelessly to ensure that your rights are protected and the best possible outcomes are achieved.

Remember, the path may be difficult, but you don’t have to walk it alone. Contact our office today to get started.

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