Divorce and Bankruptcy: When to File

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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.

Dangers of Filing Bankruptcy On Your Own

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Debtors exploring the option of filing a bankruptcy on their own, without an attorney, may be in for a few unwelcome surprises if they do not know what they are getting themselves into. While it is permissible for you to file on your own, it is not advisable for several reasons. Bankruptcy is a very complex area of law that many experienced attorneys do not practice due to its difficult nature. In addition, bankruptcy courts have particularized rules and codes that must be followed precisely for your case to proceed smoothly.

One common pitfall is individuals who choose to file for bankruptcy, but have filed under the wrong chapter. There are specific requirements of both Chapter 7 and Chapter 13 that must be met in order for you to be allowed to file under that chapter. If you file under the wrong chapter, it may result in you losing your property or not being granted a discharge of your debts.

Another difficult aspect of filing on your own is the paperwork. Many individuals do not realize that there are nearly 50 pages of petition, schedules, statements, and other documents to be completed in a typical Chapter 7. If you are missing documents, your case could be dismissed without even being reviewed. In addition, the Trustee in your bankruptcy case will require documentation such as mortgages, bank statements, paystubs, vehicle titles, and more that must be submitted in order for your case to proceed.

Debtors also often misunderstand property exemptions when filing on their own. These exemptions allow you to retain and protect assets and personal property, but they work differently based on which chapter you file, and vary if you choose federal or state exemptions. In addition, if you fail to accurately list an asset such as a tax refund or bank account, you may lose that asset.

It is important to consult with an experienced bankruptcy attorney who can ensure that all of your assets are protected and that you will be entitled to a discharge in your case. If you have filed on your own and experiencing some of the problems discussed here, contact an attorney immediately who may be able to assist you in amending your bankruptcy documents to prevent any issues in your bankruptcy.