Your marriage is ending, and your finances are a mess – and you know divorce is expensive. You fully expect that you’ll have to file bankruptcy once your marriage is over.
You may want to consider reversing course, however, and filing bankruptcy before you file for divorce. For a lot of couples, this can be significantly advantageous and make the entire divorce process a lot easier. It may even make the difference between a complicated, contested divorce and a relatively simple uncontested process.
What’s the advantage of bankruptcy before divorce?
Essentially, there are three major benefits that you may find to putting your bankruptcy ahead of your divorce:
- You can take advantage of the increased income and resource limits. If your spouse needs to file bankruptcy as well (which is likely), you will have to pass a means test – which is what controls whether or not you can file for Chapter 7 versus Chapter 13. You will likely qualify for higher exemptions as a couple, which means you can protect more of your assets.
- You can get through the division of assets in your divorce a lot faster. Dividing up the marital estate also means dividing up the debts – not just things of value. Your divorce may be a lot less contentious when you have less debt to divide.
- You may find it easier to plan out your post-divorce budget. Starting over means starting out with less income, so it’s always helpful to have less debt. A pre-divorce bankruptcy can help you and your spouse both better envision the financial future.
Does this mean that bankruptcy before divorce is always the best solution? Not at all. If your spouse makes significantly more money than you, their income may make it harder for you to qualify for Chapter 7, which is quicker and more absolute than Chapter 13. In that situation, it’s probably better to wait until your divorce is finished.
Similarly, it takes a bit of cooperation for spouses to file bankruptcy together. If your relationship with your spouse is particularly hostile, you may not be able to work together well enough to make bankruptcy easy.
When you have a lot of big decisions to make, it’s wisest to make sure that you’re on the right path. Experienced legal guidance can help.