Filing for Bankruptcy and Divorce: Which Comes First?

stressed businessman sitting outside corporate officeLet’s say that you are in a position where you are ready to file for divorce and the other spouse is not paying for your mortgage, so you are left to settle matters on your own. You may wonder if you should file bankruptcy first or if divorce is the best option. To put things into perspective, from an attorney’s point of view, it is always an important decision to settle any divorce issues before you file.

The reason why many attorneys will encourage you to consider bankruptcy first is because, if you first file for divorce, you could be inevitably delaying the distribution of assets and liabilities until the bankruptcy process is complete. You must take care of these very realistic matters before divorce becomes the forefront of your life. You do not want to come into the divorce with many debts and be treated a certain way for them – as a result, your income could be treated differently and you may lose essential rights.

The truth is, bankruptcy doesn’t have to be a long process. If you qualify for something known as Chapter 7 bankruptcy, you could be finished in as little as 90 days. Chapter 13 bankruptcy may not be the best decision for you because then both of you could be responsible for the repayment plan. The best thing that you can do is try to move forward before it becomes an issue.

Other Factors to Consider 

Community Property: Filing for bankruptcy before finalizing divorce could mean that community property could become a matter of concern. Bankruptcy actually protects community property (things that you bought during the marriage), which is why it should be considered. Community property is a huge issue in divorce cases in California at times. 

Support Payments: If you file for bankruptcy during your divorce, you cannot discharge child support or alimony amounts when the divorce is finalized. However, the family court will still be able to order support payments. 

Outstanding Debts: You should file and resolve a bankruptcy before the court finalizes the marital settlement agreement because debts must be handled according to the agreement.

Call us today if you still have questions concerning whether or not you should file for bankruptcy before or after the divorce proceedings. It is important to assess each of these matters and choose the option that works for you.