Unfortunately, money problems can lead to a divorce. Money problems also lead to Chapter 7 and Chapter 13 Bankruptcy filings. Often times, divorce and bankruptcy are sought at the same time. It is rarely a good idea to do them both at the same time. So here are so things to consider in whether you should file the Ch 7 BK before or after the Big D:
Advantages to filing before the divorce:
- only have to pay for one bankruptcy filing
- less or no debts to divide during the divorce
- assets listed in bankruptcy ready to be used in the divorce case
- if your divorce is for purely financial reasons, maybe no longer want a divorce as the stress of debt is eliminated
- may help to discover hidden assets as you will have the trustee looking for hidden assets if the divorce is going to be contentious
Disadvantages to filing before the divorce:
- Only one set of exemptions
- Have to see/deal with soon to be ex. Can be tough given the emotional situation surrounding divorce.
- Need a spousal waiver if only one party wants to do this. If no longer on speaking terms, this may be tougher to get. This means you may not use the wild card exemption and are at risk for losing assets depending on the case.
- You have to wait for the bankruptcy to proceed to finish the divorce. It is possible to file paperwork to remove assets from the bankruptcy, but this will cost extra typically.