Does Bankruptcy Impact Divorce?

June 3rd, 2020
Posted By
Michael Ryan Jones
man and woman holding two halves of money symbol paper
It often seems that financial hardship and relationship hardships go hand in hand. That’s why when couples are filing for divorce, they may also be considering bankruptcy to prepare for one household diving into two. If you live in Columbus or central Ohio and are going through a divorce and contemplating bankruptcy, here’s what you need to know.

If you’ve already filed for divorce, you can file for bankruptcy.

If you have already begun the divorce process, you may wonder if you can still file for bankruptcy in Columbus, Ohio. The simple answer is yes you can, but there are a few things you need to know.
  1. The automatic stay of bankruptcy will drag out your divorce. We know that the automatic stay protects those filing for bankruptcy from constant collections. However, because divorce includes the division of assets, filing for bankruptcy at the same time will put the divorce on pause. However, you can petition the bankruptcy court to allow the proceedings to continue.
  2. If you and your spouse are using the same divorce attorney, filing for bankruptcy at the same time can prove problematic. Once the bankruptcy filing occurs, the attorney cannot represent you both because now you are in the midst of another legal issue. Not only does this extend the amount of time of the process, but it becomes another financial burden.
Most attorneys would not recommend you file for divorce and bankruptcy simultaneously as this just complicates matters for all parties involved, and can drag out an already emotionally stressful situation.

If you are considering both legal matters, it may be best to file for divorce first.

This may seem counterintuitive, however, there are quite a few advantages of filing for divorce before going through with bankruptcy.
  • Marital Debts: During the divorce process, you and your ex will work out the division of marital assets and debts which will be taken on by each party. This allotment will also determine how much spousal support is awarded. It is important to know this before the bankruptcy filing because the payment of marital debts and spousal support are non-dischargeable.
  • Division of Assets/ Debts: Within your final divorce decree, each person will clearly know what is their personal responsibility moving forward. Because of this, it is imperative to list who is filing for bankruptcy when the decree is drawn. This will work to protect the non-filing spouse from a change in credit.
However, some may still decide to file for bankruptcy first.

If you file for bankruptcy before the divorce, there are still some advantages available to you.

In many cases, filing for bankruptcy before divorce may make the process much smoother.
  • Discharge of Debts: Debts will be discharged like credit cards, some loans, and other unsecured debts. By eliminating these debts first, you and your ex may be able to reach a settlement quicker once you do file.
  • Savings: If you and your ex decide to file for bankruptcy first, you can file jointly, saving on court costs and attorney fees.
  • Life Assets: If your ex has a pension, retirement account, etc., you may be receiving some of that in the divorce settlement. However, if you file for bankruptcy later, those funds you received may have to be liquidated.
The bottom line is this: There are advantages and disadvantages of filing for bankruptcy and divorce simultaneously. If you are considering both legal actions, it may be best to consult with an attorney on what is your best course of action.

The Jones Law Firm is Your Columbus Ohio Bankruptcy Attorney

Divorce on its own is complicated. When you add in financial stressors, it can seem unmanageable. The Jones Law Firm is here to help. If you are considering bankruptcy and divorce, let us review your situation to come up with a plan. You deserve a fresh start in life. Let us handle the finances. Contact The Jones Law Firm today.
Categories: General Bankruptcy