What happens when you file for bankruptcy during a divorce? Or vice versa? These are life-changing events that will have a considerable impact on one another in multiple ways. Understanding this can help you make the right choices for your financial situation—and your overall well-being.
As a bankruptcy and family law firm, Miller Law Group, P.C. is uniquely positioned to help during the most challenging times of your life. We can offer guidance related to Chapter 7 and Chapter 13 bankruptcy, separation, divorce, custody, alimony, and a host of other interconnected issues.
Let’s consider how bankruptcy and divorce may affect one another here in Massachusetts, and what you should do if you and/or your spouse are considering both.
Choosing Bankruptcy Before Divorce, or Vice Versa
Bankruptcy and divorce are complex legal proceedings. It can be nearly impossible to undergo both at the same time. With this in mind, you will need to determine which should come first.
The answer will depend on numerous factors:
- Is your relationship amicable? If you and your spouse are on good terms, you may find it easier to file for bankruptcy before you divorce. After bankruptcy, property and debt division will be more straightforward. However, the bankruptcy process can take months or even years to complete, depending on whether you file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code.
- Will you file under Chapter 7 or Chapter 13? If your income falls below a certain threshold, you may qualify for Chapter 7 bankruptcy. This involves a liquidation of assets (but in Massachusetts your home and other property are protected) to pay off debt and may take a few months to complete. A Chapter 13 reorganization involves a 3- to 5-year repayment plan. You will need to determine which makes sense for your financial situation and whether you can wait to divorce after bankruptcy is done.
- What is your financial situation? Filing for bankruptcy jointly is very different than filing as a single person. Exemptions, which protect certain property from liquidation in Chapter 7, are generally higher if you file jointly. On the other hand, your income will be counted together, which could mean Chapter 13 is your only option.
You and your spouse will need to consider your goals—financial and otherwise—to determine what option is best for you. Divorce before bankruptcy may mean you would qualify for Chapter 7. It may also give you and your spouse a much-needed break if you simply cannot wait to separate. Bankruptcy before divorce may make asset and debt division easier—if you’re willing to wait.
Divorce During Chapter 13 Bankruptcy
If you’re amid a Chapter 13 repayment plan and want to get a divorce, you’re in a unique situation. You can divorce, but you will need to decide whether to cancel or restructure the repayment plan. Restructuring will allow you to keep up with your fair share of the payments by dividing the repayment plan into two parts: yours and your spouse’s. Canceling will stop the payment plan, but you’ll need to assume responsibility for all of the debt.
How Bankruptcy Affects Alimony & Child Support
If you file for bankruptcy before or after your divorce, you need to know how it will affect things like child support payments and alimony. Alimony, child support, student loans, and fines and court fees are “non-dischargeable” and cannot be eliminated through bankruptcy. You are still responsible for paying for these. It is possible to have your payments lowered, however, if you can prove circumstances are severe enough to warrant a modification through the court.
Our Massachusetts Attorneys Are Here to Help
Working through a divorce is stressful enough. When you add bankruptcy into the picture, it’s easy to become overwhelmed. At Miller Law Group, P.C., we work as a team to help clients through the most complicated situations. Our 20+ attorneys, paralegals, and support staff are here to guide and protect each client through every step of their divorce, bankruptcy, or family law matter. If you work with our firm, your case will be managed by a lead attorney but supported by our entire firm. The result is a better, more effective strategy that suits your unique needs.
Contact us today to find out how our Massachusetts divorce and bankruptcy attorneys can assist you.