People may file for bankruptcy just before, during, or right after they file for a divorce. While it might affect what debts may or may not get discharged, a looming, pending or freshly finalized divorce case will not usually disqualify someone from filing for bankruptcy.
This may come as good news. After all, many Hoosiers who are struggling in their marriages are also struggling with mounting debt and making ends meet.
Still, there are a lot of legal issues a resident of the greater Indianapolis area will want to consider before trying to pursue bankruptcy and divorce at around the same time.
The timing of when to file for bankruptcy will depend on the circumstances
For example, a person will need to think about whether they want to file for bankruptcy before they file a divorce case.
There are advantages to filing for bankruptcy before divorce.
For example, while they are still married, spouses may take advantage of a joint bankruptcy filing.
Aside from saving on costs and fees, filing a Chapter 7 bankruptcy together will allow the couple to claim more of their property as exempt, meaning they are able to keep the bankruptcy court’s official from turning it over to creditors.
Getting bankruptcy out of the way first may also make divorce easier. The couple may still have to divide up some of their property in the divorce, but, hopefully, their bankruptcy will discharge most of their debts before they have to divide them.
On the other hand, filing bankruptcy together will involve the spouses trusting each other to a degree and having some ability to get along.
Furthermore, for couples with higher earnings, filing jointly for a Chapter 7 bankruptcy may not be possible due to restrictions on how much income filers can make. It might be better for each spouse to file their bankruptcy separately.
There may be other considerations for a person to think about before deciding whether to file for bankruptcy around the time of their divorce. They will need to understand some details about both processes in order to get the best result.