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Robertson, Oswalt, Nony & Associates

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Which comes first, divorce or bankruptcy?

| Jan 21, 2021 | bankruptcy, Divorce

Financial stressors are one of the leading causes of marital strife. If you and your spouse have had money struggles for months or years, you may be ready to file for divorce due to them. Yet, one or both of you may be in an untenable financial position, and you may need to file bankruptcy as well. Whether bankruptcy comes before or after your divorce, though, will likely depend on whether you need to file with your spouse or alone.

Understanding when bankruptcy comes before divorce

Many couples who go through both divorce and Chapter 7 bankruptcy choose to file bankruptcy first. If you and your spouse’s debts are shared, wiping them out together will spare you from dividing them during your divorce case. Furthermore, Arkansas’ bankruptcy code allows married couples to double the value of most exemptions for jointly owned property. Filing Chapter 7 bankruptcy before divorce, then, will allow you two to protect more of your property than you would by filing it afterward.

Understanding when divorce comes before bankruptcy

You and your spouse’s combined household income may disqualify you from filing Chapter 7 bankruptcy together. If you cannot pass Arkansas’ means test as a couple, you may want to wait until after your divorce to file individual Chapter 7 bankruptcies. Taking this route may make it easier for both of you to qualify for it on your own.

If you are planning on filing Chapter 13 bankruptcy, you will want to wait until after your divorce to do so on your own. This is because your Chapter 13 bankruptcy case will only discharge once you have satisfied the terms of your repayment plan, which takes three to five years. Likely, you and your spouse will not want to wait this long before filing for divorce.

Whether you file bankruptcy before or after divorce will depend on your unique circumstances. To determine the appropriate course of action in your situation, you will want to consult an attorney with experience in bankruptcy and family law.

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