Divorce and bankruptcy are two words that strike fear in many people. However, both of these can be your allies if you need to get out of certain situations that are no longer right for you. If you've amassed a great deal of debt, bankruptcy can even help you regain your financial health. Consider these reasons why you should file for bankruptcy before you file for divorce.
Costs of Living Go Up as Income Decreases
One of the many potential pitfalls of a divorce is the fact that your income will probably decrease considerably. If you and your spouse both worked, you probably enjoyed the benefits of living as a couple with two incomes. Working couples not only have two incomes but can also save money by splitting fixed monthly costs like rent and utility bills.
When you start your life over again after a divorce, you are likely to face a lot of expenses. From acquiring a new place to live to moving all your stuff to the new home, expenses can increase quickly. If your income decreases with the divorce, you may feel like you can’t make ends meet.
However, if you file for bankruptcy and get your debt situation resolved before the divorce, you won’t be too much in debt to afford basic moving and living expenses. In the months prior to your divorce, be proactive about restoring your financial health.
Confusing the Two Is Confusing
If you're considering filing for both bankruptcy and divorce at the same time, think twice. Doing so will likely complicate both scenarios, which can add a lot of extra stress to an already stressful time of your life. Rather than overlap the two processes, filing for bankruptcy first allows you to more clearly assess your financial situation before you divide finances in a divorce.
Also, consider the fact that, when you file for some forms of bankruptcy, an automatic stay is applied to prevent creditors from taking your property during the process of filing for bankruptcy. That stay can also prevent pesky creditors from harassing you while you sort out your complex financial situation.
The problem, however, is that the stay remains in place throughout the bankruptcy process. That can complicate the access that you need during a divorce, so it's best to sort out the bankruptcy before you say, "I don't".
Chapter 7 Is a Logical Option for Many Divorcing Couples
If you know that a divorce is inevitable and you don't want to put it off very long, you may want to see if filing chapter 7 bankruptcy is a good fit. Chapter 7 bankruptcy is typically completed quickly. In fact, it may be completed in as few as three to four months. That can be a relief if you want to file for divorce within the next half-year or so.
Also, with chapter 7 bankruptcy, you don't have a repayment plan. This is an especially welcome relief if your ex is responsible for a lot of your debt. You're sure to not want a monthly payment reminder of the frustration. Chapter 7 bankruptcy simplifies things by allowing you to make a clean cut with past debt and move on more quickly.
However, keep in mind that chapter 7 may not be for you if you and your soon-to-be ex have a lot of assets. If you acquired wealth and investments along with debt, you may not qualify for any form of bankruptcy. With chapter 7 bankruptcy, the non-exempt assets you have may be sold and used to pay your creditors.
Divorce may feel like it's a drain on your emotional resources, but it doesn't have to drain your financial resources as well. Contact Hassen & Associates to learn more about your options when filing for bankruptcy. Our caring team can help you get started on the right path to greater financial freedom.