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Should you choose bankruptcy before divorce?

| Jan 30, 2020 | Chapter 7 Bankruptcy

You and your spouse have decided that you need a divorce. One of the major issues in your marriage is money, and you believe that your spouse just doesn’t know how to save. They spend everything they get, and they’ve often put you in difficult situations due to debt.

One thing you’re concerned about is that there is a large amount of debt in your spouse’s name. Since it was taken on during your marriage, you know that it could affect you. You know that Chapter 7 bankruptcy might be an option, but would it be better to do it before you divorce or after?

Choosing bankruptcy: Before divorce

Many people choose to go through bankruptcy before divorce. Why? With a Chapter 7 bankruptcy, an automatic stay goes into place. This means that creditors can’t harass you or continue trying to collect. Your property and assets are also frozen. You won’t want to have this overlap with divorce, because it would make it impossible to divide your assets.

Joint bankruptcy can also be a good idea thanks to the double exemptions you may be allowed to take. Some jurisdictions may allow you to take a higher exemption because two people are involved in the bankruptcy instead of one.

Finally, getting your bankruptcy over with means that you will be able to simplify dividing your assets during divorce, because they will likely already be divided during bankruptcy.

It’s up to you to decide when bankruptcy is best, either before or after divorce, but it’s something to think about if you share debt (or want to protect yourself from your spouse’s debts).