Navigating Divorce and Bankruptcy

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It’s no secret that navigating divorce can be emotionally and financially challenging. Adding bankruptcy into the mix of a divorce can make the situation more complex. Both processes significantly impact your financial future, so it’s crucial to understand how they interact and the steps you can take to navigate both successfully. Here’s what you need to know about managing divorce and bankruptcy at the same time.
 
Deciding Which to File First: Divorce or Bankruptcy

If you are unsure of which to file for first, divorce or bankruptcy, here are some key matters you will want to consider.
 
Filing for Bankruptcy First
If both spouses are dealing with significant debt, filing for bankruptcy jointly before the divorce can simplify the process. A joint bankruptcy filing allows you to discharge shared marital debts together, reducing the financial complications during the divorce.
 
Filing for bankruptcy first may also save money, as you’ll only pay one set of attorney and filing fees.
 
After discharging debts in bankruptcy, you can move forward with a divorce settlement that focuses on dividing assets rather than dealing with debt.
 
Filing for Divorce First
If the relationship between you and your spouse is contentious, it may be better to finalize the divorce first. This ensures that asset division and custody arrangements are resolved without being delayed by the bankruptcy process.
 
In some cases, divorce first is necessary if one spouse doesn’t qualify for bankruptcy due to a higher combined household income.
 
As you can see, both options depend upon personal circumstances; you must choose the path that best suits you.
 
How Bankruptcy Impacts Divorce Settlements
Bankruptcy helps set you on a path to a better financial future. However, it’s important to know about its impact on divorce proceedings so you can best navigate the complexities.
 
Debt Division
Bankruptcy is able to discharge certain debts, such as credit card balances or medical bills.
 
Any domestic support obligations you have, like alimony and child support, are not dischargeable in bankruptcy and will remain the responsibility of the paying spouse.
 
Property Division
In Chapter 7 bankruptcy, non-exempt assets may be sold to pay creditors. This can complicate property division in a divorce, as some assets you were expecting to split may no longer be available.
 
Unlike Chapter 7, Chapter 13 bankruptcy allows you to hold onto your assets but requires a repayment plan, which can impact your financial negotiations during a divorce.
 
Joint Debts
If one spouse files for bankruptcy but the other does not, creditors may pursue the non-filing spouse for repayment of joint debts, even if the divorce decree assigns the responsibility to the filing spouse.
 
Having this information can greatly reduce the headache of these processes.
 
The Automatic Stay and Financial Domestic Obligations
When you officially file for bankruptcy, something known as the automatic stay goes into effect. This legal motion helps to stop wage garnishment and foreclosure. However, it does not have an impact on financial or domestic obligations such as alimony and child support. The relief from wage garnishment can help you to afford these obligations along with your regular life expenses.
 
Tips for Managing Both Processes
While no one wishes to go through these processes, knowing the best ways to manage them can significantly decrease the stress associated with them.
 
Communicate With Your Spouse (If Possible)
Open communication can simplify the process, especially if you’re filing for bankruptcy jointly.
 
Organize Your Financial Records
Gather detailed records of your debts, assets, and income. This will be crucial for both your bankruptcy filing and divorce proceedings.
 
Prioritize Your Children
If you have children, prioritize their well-being during this challenging time. Focus on reaching agreements about custody and support that serve their best interests.
 
Be Realistic About Your Finances
Understand that both bankruptcy and divorce will have lasting effects on your financial situation. Create a plan for rebuilding your finances post-divorce and bankruptcy.
 
Get The Help You Deserve
When you go through a divorce, it’s customary to hire an attorney to help you navigate the complexities of the process. Did you know you can hire someone to help you navigate bankruptcy proceedings, too?
 
When you enlist the help of a bankruptcy lawyer it can significantly reduce the stress of the process. Your lawyer will help you navigate your unique bankruptcy case challenges with ease. But don’t settle for any bankruptcy lawyer, choose one that will give you the stellar service you deserve; choose Adam M. Freiman.
 
Adam has over 25 years of law experience. He understands the unique circumstances of your situation and will work tirelessly to protect your rights and help you achieve the fresh financial start you deserve. With personalized attention and a commitment to excellence, Adam is here to guide you every step of the way.
 
Contact the office of Adam M. Freiman today to schedule a consultation and take the first step toward a brighter financial future.

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