Bankruptcy & Divorce:
What You Need to Know
The past few years have created difficult financial situations for many people. While causing financial problems, the COVID-19 pandemic has also strained many marriages. As a result, some people may be seeking a divorce at the same time that they are considering filing for bankruptcy.
During these difficult times, it is helpful to have a knowledgeable advocate on your side. At The Orantes Law Firm, we are committed to answering all of our client's questions and helping you make the best possible decisions regarding divorce and bankruptcy. You don’t have to wait until your financial situation is completely broken to file for bankruptcy. When it comes to divorce, it is vital that you have all the answers to your questions before you sign on the dotted line.
We are here to guide you through the challenging times and help you make the best decision for your future. The Orantes Law Firm proudly serves clients in Los Angeles County, Orange County, Los Angeles, and Irvine, California.
Filing Jointly
You are not legally required to file for bankruptcy jointly with your spouse (or soon-to-be former spouse). However, there are many advantages to filing jointly. For example, it is less expensive to file bankruptcy together. It will also reduce the number of issues that have to be decided in divorce court, which could speed up proceedings.
In many states, it is also true that divorcing couples who file for bankruptcy together will be able to hold on to more of their assets than if they filed separately.
Filing Separately
Filing for bankruptcy separately from your spouse may be the best option for some people with high incomes. For example, if you will not qualify to file for Chapter 7 bankruptcy while you are married, but you will as a single person, you may want to file separately. Speak with a knowledgeable bankruptcy attorney to learn more about which option is right for you.
Which to File First: Bankruptcy or Divorce?
If you are uncertain about whether you should file for bankruptcy or divorce first, there are several points you should consider. It is helpful to know that in most situations, it will be financially advantageous to file for bankruptcy first.
Filing for bankruptcy while you are still a married couple will allow your debts to be discharged altogether and may allow you to hold on to more of your assets than you could if you file for bankruptcy after the divorce.
When you file for Chapter 7, which discharges almost all debts, it is harder to qualify if your joint income is too high. In this situation, it will be better to file for bankruptcy after divorce. Speak to a knowledgeable California bankruptcy attorney to learn more about how to qualify for Chapter 7 bankruptcy.
Asset Division
Also, it is crucial to know how California law applies to property division during a divorce. In some situations, it’s better to file individually after the asset division (for instance, if you can’t double your exemptions and have more property than what you can exempt in a joint bankruptcy).
However, for most married couples divorcing, asset division is typically more advantageous to file for bankruptcy jointly before the divorce.
Discharge of Debt
When one spouse is in debt, the other spouse shares that burden. It is essential to know the terms of the divorce decree, so you know how debt will be managed.
However, if one spouse does not follow the divorce decree and refuses to pay their debt after the divorce, creditors will contact the other spouse for their payment, even after the divorce. To make sure that you are not saddled with your ex-spouse’s debt after the divorce, it might be best to file for bankruptcy before divorce.
Reclaim Your Financial Future
Navigating divorce and filing for bankruptcy at the same time can be extremely difficult. It is helpful to have a knowledgeable and supportive legal team at your side. At The Orantes Law Firm, we strive to provide excellent guidance that will help you arrive at the best outcome. Our firm proudly serves clients in Los Angeles County, Orange County, Los Angeles, and Irvine, California. Contact us today to schedule your free consultation.