Most people know that divorce puts additional stress on a person’s finances. This could lead to bankruptcy during an especially challenging time.
A few facts could help a person cope when faced with both marital and financial difficulties.
Handling both at the same time
Information from Experian emphasizes the difficulty of filing legal motions for divorce and bankruptcy simultaneously. Most court jurisdictions will place precedence over one action or the other, so for practical purposes, the two will not happen at the same time. Many courts will suspend the bankruptcy proceedings until the completion of the divorce.
This enables the courts to apportion the marital debts and assets to each party. Another practical consideration involves the sheer difficulty of undergoing two significant court cases during the same time period. This could lead to stress and impact relationships and work obligations.
Deciding which order to undertake bankruptcy
The best order to tackle these matters depends upon several factors, both personal and legal.
Filing bankruptcy before the divorce allows for the cancellation of joint marital debts, eliminating some of the complexity of dividing up property during the divorce. A bankruptcy that includes both spouses could also cut down on legal fees and lead to a simpler divorce process. However, this does require cooperation between spouses.
A divorce first can work as an advantage if one or both spouses wants to file for Chapter 7 bankruptcy. This type of bankruptcy cancels all qualifying debt. However, spouses may not be eligible to file for Chapter 7 if their joint income exceeds the median level for a Maryland couple.
Ultimately, spouses facing both bankruptcy and divorce may want to consider all their options carefully before they move forward with either major life change.