Divorce and bankruptcy are two of life’s most stressful events, and they often happen around the same time. Deciding which one to handle first can make a major difference in both processes. The order matters because it affects how debts are divided and who remains responsible for them.
Filing Bankruptcy Before Divorce
In many cases, couples choose to file for bankruptcy before starting the divorce. This can simplify the divorce process because joint debts are discharged or reduced ahead of time. Without those obligations, there are fewer disputes over who should pay what. Filing together can also save money on legal fees and filing costs. However, cooperation is key—if the relationship is too strained, filing jointly may not be possible.
Filing Divorce Before Bankruptcy
Other times, it makes sense to finalize the divorce first. This is often the case if only one spouse needs bankruptcy protection. Once the divorce is complete, each person can file for bankruptcy separately if needed. This approach may also help if one spouse earns significantly more than the other, as income plays a role in qualifying for certain types of bankruptcy.
Potential Complications
One complication is that divorce courts divide marital debt, but creditors are not bound by that division. For example, if a court orders one spouse to pay a joint credit card, but that spouse later files for bankruptcy, the creditor may pursue the other spouse for payment. Timing your filings carefully can help avoid this kind of problem.
Finding the Right Order
There is no single answer to whether divorce or bankruptcy should come first. The best order depends on the amount of debt, the type of debt, and how cooperative the spouses are. Careful planning helps ensure that neither process makes the other more complicated than it needs to be.
When divorce and bankruptcy overlap, the timing of each can shape your financial future. Understanding how they interact gives you the chance to protect yourself and make smoother transitions in both areas of life.
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