Financial problems are one of the leading causes of divorce in America. It is easy to see how money issues and debt can cause stress and harm a relationship.
Meanwhile, divorce often has a significant financial impact on the parties involved, particularly as newly divorced individuals adjust to life on a reduced income.
If you are headed for divorce and also considering bankruptcy, you need to determine whether it will be more advantageous to file bankruptcy before, during, or after the divorce.
In most cases, we do not recommend going through divorce and bankruptcy at the same time. Beyond the incredible stress, there are differences in how your debt, assets, and income are treated in bankruptcy and divorce that will likely conflict.
Whatever your situation, the ultimate goal should be to gain control over your financial circumstances, which will reduce stress and improve your long-term well-being. At Loan Lawyers in Fort Lauderdale, we have helped over 5,000 South Florida homeowners and consumers find solutions to their debt problems. Contact us today for a free initial consultation with our Fort Lauderdale bankruptcy attorneys to learn how we can assist you.
How Divorce and Bankruptcy Affect Each Other
One of the biggest tasks that divorcing parties must undertake is the division of marital assets and debt. Meanwhile, the requirements of a bankruptcy case are based on the individual’s assets and debts.
A divorcing couple in Florida must identify and divide all marital property between them, which includes all assets and debts acquired by either spouse during the marriage. This requires deciding who should take possession of each asset and/or what must be sold for proceeds to be split. If the couple cannot divide their assets amicably, the court will make these decisions on their behalf. In most cases, going through divorce will change the property you own, your income, and your debts.
When it comes to bankruptcy, you might file as an individual or as a married couple, depending on your circumstances.
In a Chapter 7 bankruptcy, the type of bankruptcy most commonly sought by individuals and couples, a court-appointed trustee sells most of the debtor’s assets and distributes proceeds to eligible creditors.
In a Chapter 13 bankruptcy, the debtor presents a plan to restructure their debt and repay creditors over time through the court’s trustee. The plan may require the sale of some assets.
In a Chapter 7 or Chapter 13 bankruptcy, certain assets are exempt, or protected, from being sold.
What to Consider About Handling Divorce and Bankruptcy at Once
If you or your spouse files for bankruptcy during a divorce, the bankruptcy court will find it is dealing with a moving target as it tries to account for your debts and assets. The court will likely suspend proceedings until the divorce court approves your division of marital property — the conclusion of an often-lengthy process.
Depending on whether you file for bankruptcy before or after a divorce, the court will find a different picture of your assets and debts.
The question, then, is which picture of your finances will help you more as you pursue bankruptcy — your pre-divorce financial standing or where you are financially after a divorce?
Should You File for Bankruptcy or Divorce First? Chapter 7 vs. Chapter 13 Bankruptcy
Here are some ideas to consider about bankruptcy and the timing of a divorce:
Filing for Bankruptcy Before Divorce
- Bankruptcy discharges (i.e., forgives) certain debts as the debtor repays creditors by selling assets under Chapter 7 or making scheduled payments under Chapter 13. A joint bankruptcy prior to your divorce can cancel marital debt that would otherwise have to be divided between the two of you as part of your divorce proceedings.
- A Chapter 7 bankruptcy requires you to sell assets to repay debts not discharged. Completing a joint Chapter 7 “liquidation” before a divorce can simplify the property division process, which may be beneficial if the process is expected to be contentious.
- A Chapter 7 bankruptcy filing can typically be completed in as little as three months. You could likely finish a Chapter 7 filing without a delay that would significantly impact your divorce.
Filing for Bankruptcy After Divorce
- To file a Chapter 7 bankruptcy, your assets and income must be low enough to pass a means test. A divorce will decrease your income and assets in most cases. If you do not qualify for Chapter 7, you may be able to structure your division of marital assets to help you qualify. However, Florida law requires an “equitable” plan; the divorce court will reject a one-sided distribution of marital assets and debt.
- Dividing marital debts before a Chapter 13 bankruptcy filing will reduce your payments in the years ahead. Under Chapter 13, you repay your debts according to a three- to five-year plan. If you go through divorce first, your spouse must take responsibility for an equitable share of the debt you accumulated together, leaving less for you to pay off in bankruptcy.
How Our Fort Lauderdale Bankruptcy Attorneys Can Help
Each bankruptcy case is unique, but bankruptcy is a right and is often a smart option for managing overwhelming debt. The Fort Lauderdale bankruptcy lawyers at Loan Lawyers can help you determine the best path forward if you are considering bankruptcy and a divorce.
We’ll take the time to hear what you are going through, provide a professional review of your finances, and help you pursue the best possible financial solution available for your unique situation. We offer a range of sensible, affordable, and proven debt solutions tailored to our clients’ needs.
If bankruptcy is correct for you, we’ll be at your side throughout the complex process of filing for and completing bankruptcy. We’ll safeguard your rights and guarantee your protection as provided by the federal Bankruptcy Code and Florida law. Our knowledge of and experience with every facet of bankruptcy law will help ensure you’re informed and comfortable with the proceedings required in Florida and that the decisions made are beneficial to you.
Contact Our Bankruptcy and Loan Modification Law Firm Today
Loan Lawyers in Fort Lauderdale is a total debt solution law firm with a proven track record of helping clients regain financial stability and peace of mind through bankruptcy and legal protection from foreclosure, repossession, and other forms of debt litigation.
Call us today at (954) 523-HELP (4357) in Fort Lauderdale or reach out online for a free review of your case with a Florida bankruptcy lawyer.
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Loan Lawyers is made up of experienced consumer rights attorneys who use every available resource to develop comprehensive debt solution strategies. Our goal is to take on those burdens, resolve those problems, and allow our clients to sleep soundly knowing they are on the path to a better future.
