Are There any Benefits to Filing Bankruptcy After Divorce?
By Space Coast Daily // July 19, 2021
Divorce is not exactly a pleasant experience to have to go through, and numerous other factors only make it worse. One factor that will inevitably come into play during a divorce is going to be money, and if you have any debts that need to be dealt with, one of the most important things to worry about is how bankruptcy is going to be dealt with, if at all.
This is as true for residents of Ohio as well as residents of any other states. Particularly, one common question that comes up is whether it is better to file bankruptcy before or after filing for divorce.
Are there any benefits to filing bankruptcy after filing for divorce?
One of the biggest causes of people filing bankruptcy, as they report, is that they filed for divorce. A big part of this is because of poor planning, and a divorce can honestly do a lot to through a wrench into even the best-laid plans.
Of course, this is not to say that there is nothing to be done to help ensure that a post-divorce bankruptcy filing goes as smoothly as possible. Not only will this result in the bankruptcy causing less strife for you, but it may also be a lot more cost effective as a result.
A key approach that many divorcing couples do as part of the divorce is file bankruptcy together. The reason why this is done is that it causes the debts of both parties to be handled before the actual divorce happens, leading to the actual divorce proceedings being just a little bit easier, due to you two not having to worry about those debts.
Not only that, but it is quite a bit cheaper for the two of you to handle these as a pair instead of waiting to do individual bankruptcy filings yourselves. This is due to the fact that no matter if it is a joint filing or an individual filing, they cost the exact same. If a bankruptcy attorney is involved, it may ultimately be cheaper to do a joint filing with that attorney instead of having to pay the costs of two attorneys between you both.
While there are benefits to going with this approach, it is, of course, not mandatory that you file together, even while you are married. This is because one spouse may feel that they need to file right away in order to get bankruptcy protection immediately.
Another factor that plays into whether to file individually or as a pair is if you think that there may be a benefit to it, such as if both of your incomes experience a drop following the divorce.
Whether to file before the divorce or afterward is ultimately going to depend on the kind of bankruptcy for which you want to file. If you intend to go with chapter 7 bankruptcy as an option, you can justifiably go with filing before you actually get divorced, as the length of time for it to all get settled is a whole lot shorter.
Chapter 7 bankruptcy involves wiping out your unsecured credit card debts and medical bills, although there are some downsides that must be understood by talking to a good bankruptcy attorney. One of the big issues that you would have to grapple with if you do actually put in a chapter 7 filing before you get divorced, however, is the fact that the means testing may be significantly worse off for you and your spouse if you do a joint filing.
This is because, in that means testing, it will examine the combined income of the both of you, and your combined income may end up being too high for you and your spouse as a team to qualify under the means testing. However, this is not entirely a bad thing. For example, if your spouse is the one who makes most of the income, doing a joint bankruptcy filing may do a world of good to help that spouse deal with their debts. And, in turn, this means that if they are the ones that are expected to pay alimony, child support, and other obligatory payments, they will not have debts hanging over their head that prevents them from paying you what you need.
When it comes to chapter 13, however, that process is quite the different ball game. Instead of having a relatively quick resolution like chapter 7 bankruptcy, which is over in only months, chapter 13 is going to take years to be finished. This is because when you set up chapter 13 bankruptcy, you will have to deal with a payment plan for the debts, which are reorganized to make it easier to pay them off.
The span of time this covers is anywhere from three years to five years in length. As a result, this may be the best option to take only after a divorce as opposed to getting it started while you are still married. Besides, once you’re divorced, you have all the time in the world to worry about getting your debts handled.
Depending on how much property the two of you own together, it may be worthwhile to consider filing jointly with your spouse before you go through a divorce. Mind you, this is only going to apply to certain states, so before you make a decision on that, be sure to check up on what your state’s laws say on this.
Specifically, in some states, you are allowed to get a double exemption for property, in the event that you file jointly. However, if you cannot pull this off, or if the number of exemptions simply are not worth doing a joint filing, your best bet may be to file separately, regardless of whether you do it before you file for divorce or after.
Of course, there are certain factors that will apply no matter if you intend to file chapter 7 or chapter 13. For example, not everyone wants to have their ex-spouse’s surname attached to the debts they just paid off through bankruptcy.
There may be a risk that you could have to take some responsibility for their ex’s debt through a family law order. This can cause all kinds of headaches that are just not worth the hassle if you can help it.
Filing bankruptcy in Ohio is not particularly complicated when put up against other states, but that does not mean that it is going to be an easy process. Law is not the easiest thing to represent yourself in general, but it is especially true for complicated financial stuff like bankruptcy. It is not nearly a linear process, after all.
If you intend to file bankruptcy, be sure to get in touch with qualified Ohio bankruptcy attorneys who are familiar with the relevant family law that relates to your case. But be careful not to rush into this — after all, for as complicated as a bankruptcy case is, you should try to make sure that the person or persons you work with work well for you. So be sure to shop around, read testimonials, and listen to what they have to say.