Bankruptcy is a legal process through which you can clear away some or all of your debt. This type of proceeding exists because the government recognizes that a financial burden can become too much for a person or family. It may feel like there is no way for you to get out from under a mountain of debt. However, bankruptcy is not automatic or easy. Obtaining a fresh start can take a lot of work, including cooperating with an attorney, a bankruptcy trustee, and your creditors.
Unfortunately, if you and your spouse are considering both bankruptcy and divorce, the situation may feel overly complicated. To learn about how these two legal matters intersect and whether you should begin a bankruptcy or divorce first, contact us at Fay, Farrow & Associates, P.C. as soon as possible.
Types of Bankruptcy
The two most common types of bankruptcy for the average person are known as Chapter 7 and Chapter 13. Under a Chapter 7 bankruptcy, all or a large percentage of your debts are paid through the liquidation process, which means all of your assets are sold. The remaining debts are then discharged and you are no longer responsible for them. This is the kind of bankruptcy that truly gives you a blank slate. You can get through a Chapter 7 bankruptcy rather quickly – usually in a few months.
However, not everyone is entitled to Chapter 7 bankruptcy. You must have a particularly low amount of monthly disposable income to go through this process. However, if your income is determined to be too high, you may still be able to go through Chapter 13.
Under Chapter 13 bankruptcy, your debts are reorganized and you are put on a payment plan you can actually afford. Because you are paying down your debt over a period of time under court supervision, this type of bankruptcy can take up to five years to complete.
Deciding When to File for Bankruptcy
If you and your spouse are having serious financial issues toward the end of your marriage, you may face the difficult question of whether to file for bankruptcy together during your marriage or divorce and then file for bankruptcy individually. There is no one right way to handle bankruptcy and divorce, and what is best for you will depend on your unique situation. However, there is an important question to ask: Do you and your spouse qualify for Chapter 7 bankruptcy?
If you and your spouse can go through a Chapter 7 bankruptcy together, you may want to do this before a divorce. This process often can be completed in less than one year, which means you do not have to delay your divorce too long. It can also simplify your divorce because you will not have to divide any major assets or debts during it.
However, if you and your spouse earn too much together to go through a Chapter 7 bankruptcy, you should think long and hard about beginning a Chapter 13 bankruptcy when you want a divorce. This type of legal proceeding could take years, which could make you delay a divorce for a significant period of time. Also, obtaining a divorce during the bankruptcy could complicate both legal matters. You should speak with an attorney before making a decision. However, it may make sense to divide your marital assets and debts during a divorce and then consider bankruptcy when you are independent.
Contact Our DuPage County Divorce Lawyers Today
If you want to obtain a divorce but your financial situation is so dire you are considering bankruptcy, call us at Fay, Farrow & Associates, P.C. at 630-961-0060 today. We will look over your financial situation and advise you on whether to move forward with a bankruptcy right away or hold off until your divorce is finalized.