It is not uncommon for couples who are filing for divorce to consider declaring bankruptcy as well. Ending a marriage is a major life transition that can be costly, and discharging applicable debts will help both parties maintain their financial security. But which type of bankruptcy should you file, and when? Here, Honolulu’s leading bankruptcy and debt relief attorney shares some insights on the subject. 

What Comes First, Divorce or Bankruptcy?

There are several reasons to declare bankruptcy before filing for divorce. First, doing so will allow you and your spouse to split the costs. Second, it will prompt you to inventory all financial accounts, which will streamline the process for dividing assets. It will also ensure you do not waste time during the divorce proceedings distributing debts that will be discharged. Third, you may be able to double exemptions by filing as a couple.

In some circumstances, though, individuals may choose to declare bankruptcy after finalizing their divorce. If the marriage is especially unhealthy, for example, you cannot expect your spouse to be cooperative during the bankruptcy proceedings. Another reason to pursue debt relief after divorce has to do with meeting the filing requirements. If you want to file for chapter 7 but your combined income makes you ineligible to do so, waiting until after the divorce could help. 

Should I Declare Chapter 7 or Chapter 13?

For those who qualify, chapter 7 bankruptcy essentially provides a clean slate. It allows couples to discharge all applicable debts within a matter of months. Chapter 13, on the other hand, requires a three to five-year payment plan. During this time, you continue making payments. Anything remaining after the payment plan ends is then discharged.

Those who file for divorce shortly after finalizing their chapter 13 arrangement will have to restructure the payment plan during the subsequent proceedings. This makes chapter 13 bankruptcy more complicated for divorcing couples, but it can still be the best approach for debt relief in certain scenarios. 

If you want to declare bankruptcy before or after filing for divorce, turn to Greg Dunn, Bankruptcy and Debt Relief Attorney for guidance. Based in Honolulu, HI, this Oahu native has assisted with more than 12,000 bankruptcy cases since 1996. To see what past clients have to say about his debt relief services, visit his website. You can schedule a free initial consultation by calling (808) 524-4529.