Financial troubles and divorce go hand-in-hand for many California couples. In fact, disagreements about money still rank high on the list of why people decide to end their marriages. Often, the divorce only rectifies some of those issues and may even create others. For this reason, you may be among many people who realize filing for bankruptcy may provide a better chance at financial stability in the aftermath of the divorce.
However, should you file for bankruptcy first or file for divorce first? You probably won’t get a simple answer to that question since numerous factors go into making that choice. It depends on your situation.
When it makes sense to file for divorce first
One of the primary reasons to wait until after the divorce is final to file for bankruptcy is income. If you attempt to file prior to the divorce, your total household income may preclude you from qualifying to file. If you wait until after the divorce, only your income will count when determining eligibility for filing. Moreover, you may have a better picture of your financial situation after completing the property and debt division part of your proceedings.
When it makes sense to file for bankruptcy first
Sometimes, it makes more sense to file for bankruptcy before filing for divorce. If you and your spouse have numerous joint debts, it may be better to file bankruptcy first, especially if your largest asset is your home, your mortgage is under water, and neither of you is sure how to handle the home in the divorce. This may be beneficial if your mortgage lender won’t work with you, you tried but failed to sell it or neither of you can qualify to keep the home on your own.
In addition, you and your future ex-spouse can split the costs of the process, including filing fees and attorney’s fees. You may also receive higher exemptions if you file jointly so that you may retain more of your assets afterward.
When it makes sense to seek support
Determining which route would be better for you and your financial security post-divorce may be more problematic than you first realized. In order to make an informed decision, it may worth your while to sit down with a bankruptcy attorney who can analyze your situation and provide you with advice regarding the course of action that will offer you the best chance at more secure financial footing as you start your new life.