Common Links Between Divorce and Bankruptcy

When going through a divorce, one of the last things you want to think about is filing for bankruptcy. Unfortunately, it’s actually not all that uncommon for Arizona residents to be forced to consider the bankruptcy option, and that can make things difficult. After all, both filing for bankruptcy or for divorce entails complex financial issues, and when the two legal scenarios intersect, the issues grow even more complicated. To further explore this topic, we’ve broken down three of the common links between divorce and bankruptcy in the state of Arizona.

Financial Obligations

Generally speaking, there are two types of financial obligations that come out of a divorce that have the ability to impact a bankruptcy: (1) child or spousal support, and (2) the division of marital property. In the event that one or both spouses file for a Chapter 7 or Chapter 13 bankruptcy, it is likely that any support obligations will remain enforceable. When dealing with any outstanding obligations that are tied to property division, however, a Chapter 13 bankruptcy filing could make a significant impact. Your Schill Law Group attorney can help you determine specifically how your divorce obligations may be affected by a bankruptcy.

Timing

If you and your spouse have been considering bankruptcy, you will likely have questions about when to file. Is it better to file for bankruptcy before filing for divorce or after? Making the decision to file jointly for bankruptcy prior to filing for divorce may result in your ability to save money on court costs, and the process of dividing assets and debts may be simplified. Additionally, if you choose to file for divorce more than 180 days after filing for bankruptcy, you’ll find that any property that is awarded in the divorce will be inaccessible to creditors.

There are, however, benefits to beginning the divorce process prior to filing for bankruptcy. There is a chance that doing so could allow for more options regarding the type of bankruptcy that you pursue. While a Chapter 7 filing can be completed within a few months, making it simple for you to quickly complete the process before divorce, a Chapter 13 takes much longer to complete and will complicate the divorce process. Consequently, it’s usually better to file for divorce before bankruptcy if you plan to go the Chapter 13 route.

Working Together 

The financial aspect of any divorce is stressful, but when a bankruptcy is involved, it puts a lot more pressure on both parties. If you hope to file for both a divorce and a bankruptcy during the same window of time, it’s imperative that you and your spouse have the ability to work together in order to make the process go as smoothly as possible. In many cases, this means that you should both hire attorneys who understand the legalities of both divorce and bankruptcy filings. This will allow you to communicate constructively and to ensure that you are treated fairly.

No one looks forward to filing for bankruptcy or for divorce, but these processes don’t need to be as stressful as you may imagine. In order to avoid any negative impact on your bankruptcy or divorce filing, you’ll need to be willing to offer full disclosures to all professionals who may be involved with your cases/filings. If you are planning on filing for bankruptcy, you should advise your bankruptcy attorney about the likelihood of your divorce. Similarly, your divorce attorney should be told that you are considering filing for bankruptcy.

Do you need help with your divorce or bankruptcy in Arizona? The attorneys at Schill Law Group have experience in both of these areas, putting us in the unique position to be able to handle your case. Give us a call to learn more today.