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Filing Bankruptcy Before a Divorce

Whether financial stress is a factor before or after divorce, bankruptcy and divorce are legal actions that are often interrelated. When planning for divorce, it is important to understand the consequences of your timing for filing bankruptcy.

The advantages of filing bankruptcy prior to divorce are:

  • Simplifies issues in the divorce, i.e. neither party gets stuck with debt neither can afford to pay, bankruptcy will eliminate the unsecured debt for the couple;
  • You can avoid later legal action taken by creditors
  • Courts consider debts when dividing marital property
  • Bankruptcy can protect some assets from creditors making those assets available for division in the divorce, i.e. a pension plan or house.

Before getting a divorce, you and your spouse can file bankruptcy jointly or you can file separately. Title 11 of the United States Code (USC) §302 — Joint cases outlines the right of a legally married couple to file a joint bankruptcy petition.

One advantage of filing jointly is that you pay for one bankruptcy filing instead of two. When going this route, you and your spouse must be getting along well enough to communicate and work out the bankruptcy together. If conflicts are too much, you may be better off filing separately.

Filing beforehand generally saves costs. However, an experienced bankruptcy lawyer can provide legal advice based on your particular financial situation and advise the best timing for filing bankruptcy.

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