Money issues can often cause a marriage to fail if two spouses constantly argue over finances. A divorce in itself can be expensive, and it can add to what was already a significant financial burden. Filing for bankruptcy is one way that allows people struggling with debt to wipe out certain obligations and obtain a fresh start. Bankruptcy is a legal process through which people who cannot repay debts to creditors may seek relief from some or all of their obligations.
Chapter 7 and Chapter 13 are the two main types of bankruptcy people typically file. Each offers different benefits, but it is important to know that while bankruptcy can stop most collection actions against someone, it does not eliminate all types of debt. Choosing the option that is best for your situation depends on several factors, including income, property, and future goals after a divorce.
Filing Bankruptcy Before a Divorce
In many cases, people who are going through a divorce are not sure when the best time is to file for bankruptcy: before or after the divorce. Every divorce is unique, so it is best to seek professional legal help. However, there are several benefits to filing for bankruptcy before filing for divorce, such as the following:
Resolving any financial debts ahead of time allows a couple to focus on divorce issues such as division of assets and child custody.
Bankruptcy can resolve disputes involving how marital debt will be divided before filing for divorce.
If bankruptcy is filed post-divorce, the two parties may need to file separately, resulting in double the costs, time, and effort.
Chapter 7 Versus Chapter 13 Bankruptcy
Chapter 7 and Chapter 13 bankruptcy offer helpful solutions to debt issues. Chapter 7 is mainly for the low-income population, and it may require some assets to be liquidated in order to pay a portion of the debts owed. If a person has enough income to pay at least a portion of their debts, then they may opt for Chapter 13. One benefit of Chapter 13 bankruptcy is that it will stop a foreclosure and require the lender to allow the borrower to make up any outstanding payments over a period of time. In Chapter 13, a person must prove that they have enough income for a repayment plan.
When considering bankruptcy during a divorce, it is important to know that child support and spousal maintenance obligations are exempt from bankruptcy. This means a person will continue to owe these debts in full. When filing for Chapter 13 bankruptcy, these obligations may be incorporated into the debtor’s repayment plan.
Contact a DuPage County Divorce Attorney
If you are considering bankruptcy during or after your divorce, it is important to seek legal counsel to understand the steps you should take to secure a debt-free future. The Andrew Cores Family Law Group understands the complexity of financial issues when ending a marriage. Our knowledgeable Wheaton, IL bankruptcy and divorce lawyers can guide you through the legal process to get you back on your feet. Call our office today at 630-871-1002 to schedule a free consultation.