Financial issues can often lead couples to divorce. In fact, they may have contributed to your marriage’s downfall. As you and your spouse prepare to split, you might find yourself traversing rocky economic terrain and you may feel ready to file bankruptcy. You can do so during divorce proceedings. But most people opt to file beforehand or afterward.
Consider your circumstances
You and your spouse have the option of filing bankruptcy in the middle of your divorce, together or alone. Yet, bankruptcy’s automatic stay will prevent you two from dividing your assets. The automatic stay remains in place until your bankruptcy’s discharge. Yet, by filing Chapter 7 bankruptcy with your spouse before your divorce, you two will have an easier time dividing your property, since the proceedings will eliminate most of your debt. Since Chapter 7 proceedings tend to last for three to six months, your divorce will not face serious delays.
Yet, you and your spouse’s combined incomes may disqualify you from filing Chapter 7 bankruptcy together. In this case, you will want to do so on your own after your divorce. You may also want to file bankruptcy after your divorce if you’re pursuing a Chapter 13 repayment plan. Chapter 13 takes three to five years to complete, which would cause significant delays to your proceedings. And if you and your spouse file Chapter 13 together, you may end up responsible for each other’s debts.
Consider exemption laws
Keep in mind that Kentucky doubles Chapter 7 bankruptcy exemptions for married couples. These exemptions apply whether you follow state or federal laws. You or your spouse may want to take advantage of them if you plan on keeping certain assets, such as your home or vehicle, once your divorce finalizes. You may have an easier time doing so – and staying within the exemption limits – by filing bankruptcy beforehand, so long as you qualify.
Filing bankruptcy and for divorce close together may seem like an unnecessary headache. Yet, it can give you more personal and financial freedom once the proceedings end. An attorney with family law and bankruptcy experience can help you understand your options for moving forward.