If you are currently involved in a divorce proceeding, you undoubtedly have many concerns. If you or your soon-to-be ex-spouse have significant debts, you are also likely considering whether you should file for bankruptcy. Filing jointly before the divorce is final does save you money on filing fees for the bankruptcy court. However, there are many factors to consider when deciding when to file.
Chapter 7 vs. Chapter 13
If you file a Chapter 7, you can get rid of most of your unsecured debts such as credit cards and medical bills. Because you can receive a discharge in a few months, your bankruptcy would be completed quickly before a divorce. However, if you choose to file jointly, both incomes have to be included in the determination of eligibility to file for Chapter 7. A Chapter 13, on the other hand, takes 3-5 years to complete a repayment plan. If Chapter 13 is the best option for you based on your financial situation, you should consider filing as an individual.
Property Division in Divorce Settlement
https://mapesbankruptcyattorneys.com/kalamazoo-mi-bankruptcy-attorney/Filing for bankruptcy before a divorce can simplify the issues regarding the division of debts and property in a subsequent divorce. For example, if you filed a joint Chapter 7, because you and your spouse are no longer responsible for your unsecured debts, you do not have to agree to pay any joint debts in a divorce settlement.
If you filed for divorce first and agreed to be responsible for jointly-held debts, your subsequent bankruptcy might not eliminate your responsibility to pay those debts. Your spouse could force you to pay the debts even after a completed bankruptcy.
Another important issue to consider before filing for bankruptcy jointly is whether your state’s exemption laws allow you to protect all the property you own with your spouse. Michigan allows you to use the federal exemptions, which permit you to double your exemption amounts if you file for bankruptcy jointly. If you have a lot of property, it may be better to file jointly to fully protect your property.
Because there are many issues to consider based on you and your spouse’s unique financial situation, you should consult with an experienced bankruptcy attorney who can guide you through the process and provide advice as to the best option for you.