Financial stress is one of the leading causes of divorce among couples in the United States today. Many couples who are facing divorce have a large amount of debt and may be struggling to cover all of their bills. To make things more difficult, a divorce court will divide all marital property and assets, which can leave each spouse with substantially less property than they enjoyed during the marriage. Marital debts will also be divided, meaning a spouse may be expected to cover significant debt payments despite a substantial decrease in household assets and income. It is not difficult to imagine why many newly divorced individuals end up exploring bankruptcy as an option for financial relief.
The truth is that, while filing for bankruptcy after a divorce can help you get back on your feet financially, in many situations it is better to explore your bankruptcy options prior to divorce proceedings. The most beneficial timing of a bankruptcy filing will depend on the specifics of your situation, so you should always consult with an experienced New York bankruptcy attorney to review your options. At The Law Office of Ronald D. Weiss, P.C., we understand that you are going through a stressful time and will advise you of your best course of action, so please call us today at 631-271-3737 for assistance.
Bankruptcy before divorce
If you and your spouse are able to amicably handle a bankruptcy filing together, filing prior to divorce proceedings can be beneficial. For example, married couples can double the amount of certain bankruptcy exemptions under New York bankruptcy laws. This means that couples that file for bankruptcy while they are still married may more equity in their home under the Homestead Exemption or more of their personal property. Additionally, you will both be able to discharge your individual and joint debts, which will relieve the need for arguments regarding the division of debt in your divorce. In many situations, filing while you are still married allows each of you to begin with a clean, debt-free slate.
Filing after divorce
Despite the doubled exemptions and joint debt discharge, some couples may still benefit more from waiting to file for bankruptcy until after their divorce is final. If you and your spouse earn significant combined income, you may not pass the means test together, which may disallow you to file for Chapter 7 bankruptcy. If you file for bankruptcy after divorce proceedings are finished, the court will only take your individual income into consideration and you may then qualify for Chapter 7, which is preferable in many situations. An experienced attorney can review your finances and income and advise you on which timing is best for you.