It’s no secret that money is one of the most common causes of tension in a marriage. When the financial troubles rise to the level of collection letters and harassing phone calls, the breach between spouses can become irreparable. The couple may decide to get divorced and also to file for bankruptcy.
Which Should Come First, Bankruptcy or Divorce?
There’s no simple answer to that question since the right solution depends upon the couple’s unique circumstances. More often than not, however, couples decide that it’s more advantageous to complete a joint bankruptcy before filing for divorce, but this is not the right answer for everyone.
Length of Time
Chapter 7 bankruptcies complete in only a few months, discharging most or all debts. A Chapter 13 bankruptcy is a debt repayment plan taking three to five years to complete. Chapter 13 is often used in order to prevent foreclosure on the home. It gives the homeowners time to catch up on back mortgage payments while repaying negotiated balances for other debts, but property and debt division in the divorce will be more complicated.
Jointly-Owned Property
When there is jointly-owned property and debt, it normally makes sense to file jointly for a Chapter 7 liquidation. This will simply the division of property and distribution of debts in the divorce since most debts will be eliminated. Some debts, such as child support and student loans, will still remain.
Frozen Assets
Filing bankruptcy before a divorce can lengthen the time needed for the divorce to complete. When a bankruptcy is filed, assets are frozen until they are liquidated or otherwise handled by the trustee.
Chapter 7 Eligibility
A means test is applied to determine whether or not someone is allowed to file Chapter 7. In Maryland, the maximum allowable income for one person is $59,475 or $76,489 for two people. A sole earner might be able to qualify for Chapter 7 when filing jointly, but not if filing singly.
Reduced Legal Fees
When filing jointly, there will be only one court filing fee and one fee for a bankruptcy lawyer in Baltimore.
The experienced legal counsel that is needed during this stressful time can be found at the Law Offices of Frank E. Turney, P.A. This bankruptcy lawyer in Baltimore will prepare a detailed assessment at no charge in order to determine the right way to proceed. Call or visit the website to schedule your free consultation.
