The Truth about Divorce

One of the leading causes of divorce is financial hardship. Overwhelming credit card debt, sky-high mortgage payments, and income reduction have the tendency to pressure and crack even the most solid couples. And while a divorce is messy enough, adding a bankruptcy to the mix can certainly complicate things further.

However, one of the easiest ways to eliminate complications and make the transition as smooth as possible is to file bankruptcy before divorce. There are a number of reasons why this makes sense, including a cheaper filing price, getting a better handle on the martial debt, and easing the nature of the divorce process itself. These facts are explained in further detail below.

 

Fact #1: It is Cheaper to File Together

This is a common sense fact regarding bankruptcy and divorce; however, divorcing couples can save themselves thousands of dollars in attorney's fees and filing fees by filing jointly for bankruptcy as opposed to filing separate petitions after the fact.

 

Fact #2: You Will have a Better Sense of the Total Marital Debt

In a perfect world, divorcing couples would sit down, divide the marital debts equally, and move on with their lives. Unfortunately, this is rarely the case. For example, consider a wife who knows her husband will be filing bankruptcy after the divorce, but she would rather pay off her debts in a different way. She would probably divide the debt equally and move on. However, a few months later, a bankruptcy court might decide her husband is eligible for a discharge of his obligations, and he could potentially walk away from his marital debt all together.

With the ex-husband off the hook, the creditors can come back after the wife for the balance because the debt was acquired during the marriage. The wife will be stuck paying her half of the debt, as well as his, when she could have avoided this problem by filing jointly to begin with.

As this example makes clear, it is much easier (and more fair) for both parties to file bankruptcy beforehand to see exactly which debts will be discharged and which marital debt must still be divided and paid back following the divorce. It helps to put everyone on a level playing field, and it takes away some of the complications that tend to make divorce nastier than it needs to be.

 

Fact #3: Bankruptcy Generally Stops the Divorce from Moving Forward

Another reason to file bankruptcy together is the sheer fact that the divorce will be postponed by the process no matter what. There are a variety of reasons why this is the case, but the main reason has to do with the seizure of divorce attorney fees.

Basically, any payment made over $600 prior to bankruptcy must be accounted for and divided equally among creditors. So, for example, if a person pays his or her divorce attorney for twenty hours of work but stuck their other creditors during the same month, the court will require that money to be taken back from the divorce attorney and divided fairly among the other parties in the bankruptcy.

Obviously (and for good reason), a divorce attorney is not going to spend countless hours working on a case only for the paycheck to be seized at the end of the day. Because the divorce process will be held up indefinitely until the bankruptcy proceedings are over anyway, it is best that couples work together if possible and file jointly with the courts.

 

Bonus Fact: The Healing Benefits of Bankruptcy

Some couples may actually be surprised to see that filing bankruptcy removes the need for divorce altogether. It is a nice change to have the creditors stop calling, the legal notices stop showing up in the mail, and peace of mind once the stress of debt is lifted. This short period of peace often gives couples the clarity they need to see what is really important in life-namely, each other. Filing bankruptcy is sometimes the fresh start a married couple needs to pull their financial and family life together for the long haul.