Tag Archives: divorce finances

When Divorce and Bankruptcy Meet

bankruptcy, Wheaton divorce lawyersSometimes, things simply go bad. It is thankfully rare, but it is not unheard of that someone would have to file for bankruptcy and divorce at the same time. If this happens to you, you may question whether or not to file for both at the same time, or if not, which matter to pursue first. Illinois divorce laws and bankruptcy laws make the answer to that question fairly clear.

Which to File First?

Illinois divorce law and bankruptcy law essentially make filing both petitions at the same time impossible. When you file for bankruptcy, you generally hand over your assets to the care of a bankruptcy trustee for sale or disposition as necessary to pay off your creditors. Once you have commenced a bankruptcy filing, you may not make unilateral decisions about your property. Technically it is no longer yours. Thus, there is nothing for a family court judge to divide.

Though you are not generally able to file both bankruptcy and divorce petitions at the same time, the question of which order you ought to file them in is up to the individual. In most situations, it is recommended to file for bankruptcy before divorce, especially if you get along well with your spouse. The reasons are straightforward in that if you file for divorce first, property division will almost certainly give you new assets, which will then almost certainly be sold to pay your existing debts. Therefor, filing for divorce before a bankruptcy filing can put you at a significant disadvantage.

The Advantages of Bankruptcy First

There are several reasons why filing bankruptcy before divorce is the best course of action. Illinois does allow married couples to claim two sets of exemptions if they file jointly, which means that double the amount of property can be kept out of the hands of the bankruptcy trustee. It is also possible to discharge joint debts in this manner if you have many of them.

An important thing to be aware of in this regard is that filing for Chapter 7 bankruptcy does have income limits. In Illinois, your monthly income must be below the median amount for your household size, or you must be able to pass the means test. If you are unable to do so, it may be in your best interests to file for divorce first, because then you and your former spouse should be able to qualify individually. If you intend to file for Chapter 13, however, you would both be responsible for the repayment plan.

If you do file for bankruptcy before divorce, be advised that you should also have a good enough relationship with your spouse to discuss support issues beforehand. If you have no income, or you will not have access to certain amounts of income, it does not make sense for a judge to require that you pay support based on that income.

A Legal Professional Can Help

If you are in a situation where bankruptcy and divorce are both on your horizon, an experienced divorce attorney can make all the difference. The compassionate Wheaton divorce attorneys at our law firm are well versed in the complexities of Illinois divorce law, and we will put that knowledge to work for you. Contact us today to discuss your options.

 

Sources:

https://www.law.cornell.edu/uscode/text/11/704

http://www.illinoisbankruptcy.com/exemptions.html

https://www.legalconsumer.com/bankruptcy/means-test/state.php?st=IL

Taxes and Divorce in Illinois

taxes. DuPage County divorce attorneysIf you are going through divorce proceedings or considering initiating a divorce, you may have questions about how getting divorced in Illinois may affect your tax liability, especially if tax season is nearing. Dealing with taxes in the midst of a divorce can be problematic and fraught with emotion, and the process becomes even more complex when the taxes themselves are complicated.

Going through a divorce is stressful enough, and worrying about how the divorce may affect your taxes should not be something you need to handle alone. No matter what your tax situation looks like, an experienced Illinois divorce attorney in DuPage County can help make sure your rights are protected and that your tax obligations are met.

Common Tax Issues That May Arise During an Illinois Divorce

There are several issues that may affect a person’s tax liabilities when he or she is going through a divorce or has recently finalized a divorce. Some of the most common matters that arise include questions about:

  • Working amicably with your spouse or ex-spouse to plan how the tax returns will be filed;
  • Filing as married jointly or separately, or unmarried;
  • Considering delaying finalizing the divorce in order to file one final joint tax return;
  • Who will claim the children as dependents;
  • How child support obligations may impact dependent exemptions;
  • Splitting exemptions when there are an odd number of children;
  • Which parties may claim which deductions;
  • Determining how and whether a tax return will be split;
  • Including any alimony payments in gross income on tax returns;
  • Deciding which party owes what portion of taxes due to be paid;
  • What to do if either party was not a resident of Illinois during the tax period, or you lived apart all year and shared no income;
  • How a shared business or partnership factors into tax liability after divorce;
  • Whether you can deduct legal fees associated with tax advice related to your divorce; and
  • Indemnification protections if your spouse engages in any misconduct or false statements.

Consult an Experienced Family Law Attorney in DuPage County

Our family law attorneys are experienced in working with divorcing couples who have complicated tax issues. We regularly consult with financial and tax professionals – such as appraisers, actuaries, and accountants – who can advise regarding even the most complex tax matters.

Whether you believe your taxes may become a sticking point in your divorce, or you simply want to plan ahead to prevent any hang-ups when it comes to filing your taxes during or after your divorce, do not hesitate to consult with one of our experienced DuPage County divorce attorneys.

 

Source:

https://www.irs.gov/publications/p504/ar02.html#en_US_2015_publink1000176072

Your Credit Rating and Divorce

credit rating, Wheaton divorce lawyerIt is not unusual for people’s credit ratings to take a hit during and after divorce proceedings. The divorce itself cannot directly damage your credit, as some people mistakenly believe.

However, because divorce represents a time of emotional and financial tension, as well as disputes over who is responsible for paying which debts, it is not uncommon for money to be tight, payments to fall behind, and bills to fall through the cracks.

The good news is that your experienced divorce attorney in DuPage County can help you protect your credit throughout your divorce proceedings, and after, and can even help you repair damaged credit, if necessary.

How Can Your Divorce Attorney Help You Manage Your Credit?

There are a number of steps your family law attorney in Illinois can take to help you protect your credit during your divorce, including but not limited to:

  • Negotiating with your creditors and any collections agencies;
  • Helping you get a clear picture of your financial situation, including your assets and debts;
  • Arranging payment plans with various creditors;
  • Setting up a realistic and workable budget;
  • Setting up scheduled or automatic payments for outstanding debts;
  • Making sure you have access to all accounts so you can monitor repayment;
  • Closing or refinancing jointly held accounts;
  • Checking for outstanding property liens;
  • Working with your spouse’s attorney to determine how debts will be paid during the divorce proceedings;
  • Taking steps to prevent your spouse from draining or transferring your assets, or spending wildly and incurring more debt that you could be held responsible for;
  • Working to find hidden assets that your spouse may be keeping from you;
  • Making settlement offers to creditors to reduce or discharge debts;
  • Discussing bankruptcy options if applicable;
  • Helping you establish your own personal credit if you lack a credit history;
  • Checking your credit ratings from all three credit bureaus regularly and disputing any dings to your history that are inaccurate;
  • Writing letters to credit bureaus asking them to remove negative reports, especially when you have made a good faith effort to take care of your debts;
  • Seeking to hold your spouse to any agreement or obligation to pay certain debts;
  • Taking steps to prevent identity theft; and
  • Providing credit counseling referrals.

Consult an Experienced Family Law Attorney in DuPage County

While divorce can be a time of uncertainty, your passionate DuPage County family law attorney can help you gain control of your credit rating, by working to improve or maintain your score. Having a solid credit score is one step towards establishing financial independence from your spouse, and moving forward with your life.

 

Source:

http://www.experian.com/blogs/ask-experian/how-divorce-can-impact-your-credit-scores/