What happens when divorce and bankruptcy overlap?

As a Tampa FL divorce attorney can tell you, money problems are one of the main causes of failed marriages. In turn, divorce can lead to substantial money problems. Divorce is an already stressful ordeal, but what happens when a partner endures money problems that require them to file for bankruptcy? Sometimes divorce and bankruptcy overlap. Dealing with divorce and bankruptcy at the same time can seem impossible to handle. The following are some important things to consider when a divorce and bankruptcy overlap. For more information about handing divorce and bankruptcy proceedings at the same time, contact a Tampa FL divorce attorney from The McKinney Law Group.

Chapter 7 vs. Chapter 13 Bankruptcies

A Chapter 7 bankruptcy liquidates all unsecured debts. Typically, all debts are discharged within a few months. To qualify for a Chapter 7 bankruptcy, there are certain income and means requirements that must be met.

A Chapter 13 bankruptcy is different in that it requires a repayment plan to pay back debts within 3 to 5 years. If you make too much money to qualify for a Chapter 7 bankruptcy, this is the next best option. Regardless of which type of bankruptcy you opt to pursue, you may be best served by working with a Tampa FL divorce attorney who can guide you through the process.

Should I File for Bankruptcy Before or After My Divorce?

Assuming both spouses intend to file for bankruptcy, there are a few things to consider when determining whether to file for bankruptcy before or after your divorce:

  • Time: If you are filing for a Chapter 7 bankruptcy, it can be done before a divorce since it only takes a few months. Since a Chapter 13 bankruptcy process can take up to five years, it might be best to file after the divorce.
  • Allocation of Debts: If you and your spouse are both responsible for the debts, it is generally easier to file for joint bankruptcy before divorcing. Otherwise, regardless of who is assigned to repay a debt in a divorce, both spouses are still deemed responsible for the debt. Talk to a Tampa FL divorce attorney if your spouse and you disagree about who is responsible for which debts.
  • Property Division: If you and your spouse jointly own most of the property, then it is generally easier to divide the property after a joint bankruptcy. However, you should ensure that your state allows enough exemptions to protect the property. Some states allow more exemptions if you file jointly; if your state does not, it may better to wait until after the divorce to file.
  • Qualifying for Bankruptcy: A joint income while married may hurt your chances of qualifying for a Chapter 7 bankruptcy. Conversely, if you are divorced then your individual income will be less and may improve your chances of eligibility.

Whether to file jointly before a divorce or individually after a divorce largely depends on your situation, as well as the laws in your state. A divorce attorney in Tampa FL can provide you guidance based on your unique circumstances.