Bankruptcy

Divorcing? Should you both file for bankruptcy first?

By Richard K. Gustafson

The marriage is broken.  The parties can not reconcile.  One or both of them is working to support the family.  There may be children.  The couple is already struggling to meet monthly debt obligations.  This is an all too familiar scenario that bankruptcy lawyers see all the time.  There is always the inevitable question, should I file for bankruptcy before I get divorced?  The short answer is yes, filing a chapter 7 bankruptcy (if needed) before divorcing can be a very good idea.

The bottom line here is that most of the time the standard of living of both spouses declines after a divorce.  Income that used to support one household is now supporting two households.  Thus, the income doesn’t stretch as far.  Both spouses should want to preserve as much of each other’s income in order to provide for their children and to maintain their own standard of living as best as possible.  Certainly everyone would agree that paying credit card debt is not as important as maintaining a decent place to live for themselves and their children, paying child support, paying spousal maintenance (if applicable), buying clothes and groceries, etc…

Eliminating unsecured credit card debt can also simplify the divorce proceeding thereby saving money on divorce lawyers.  The less there is to fight about in the divorce, the faster and less expensive the divorce can be accomplished.  If neither spouse fears being stuck with the marital credit card debt, that leaves one less issue that must be addressed in the divorce.

If both parties can come out of the divorce free of unsecured debt obligations, both parties benefit.  Certainly if you are considering a divorce and are worried about how the bills are going to get paid once you are divorced, it could be a very good idea to sit down with your estranged spouse and discuss financial issues.  Hopefully both spouses can recognize the benefits of working together prior to the divorce and take action that could benefit both of them!

Full post as published by Consumer Bankruptcy Blog from Legal Helpers on January 16, 2009 (boomark / email).