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Divorce or bankruptcy. What should I do first?

| May 10, 2013 | Bankruptcy, Divorce, FAQ's

A common question indeed, although there is not a one-size-fits-all answer. I have lectured on this topic several times among my colleagues. As a general rule, if there are joint debts, a spirit of cooperation and a joint goal in getting those debts wiped out, it often makes the most sense to file the bankruptcy before the divorce, because then you will only need to pay for one attorney, as opposed to two separate attorneys, which is what would happen if you both waited until the divorce was done. Those are a lot of “ifs,” with a couple of the drawbacks including the fact that if the divorce is put on the back burner, then one spouse’s rights could be jeopardized, for instance, if that delays the implementation of child support.

It is probably best that both spouses have separate divorce counsel while the bankruptcy is going through. I typically do not like to do a bankruptcy for somebody who is going through a divorce without a divorce attorney, because it would be irresponsible for me to not give you appropriate advice in the divorce as the divorce can affect the bankruptcy and vice versa, and if I’m giving you advice in the divorce, then you should hire me to be your divorce attorney. If the divorce has not started as of yet, or if it is going to be a joint bankruptcy filing, that is less of an issue.

Another reason to file for bankruptcy in two separate cases is when your combined income puts you over the median income for your household size, which could render one or both of you ineligible for a joint Chapter 7 bankruptcy, whereas you might both be eligible for a Chapter 7 discharge if you were to file separate cases and could exclude the other spouse’s income. If one spouse wants to file but the other one does not, then as a general rule I would normally suggest getting the divorce done first, unless there is a pressing need to file for bankruptcy, such as a garnishment or foreclosure. Again, the case-by-case analysis differs greatly.