3 Pros & 3 Cons to Filing for Divorce Before Filing for Bankruptcy

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Filing for divorce before bankruptcy can have some upsides and possible drawbacks, a Scottsdale divorce attorney explains. Here’s why and what you should know.

Divorce and debt can be closely related, as money problems often strain marriages and contribute to divorce.

When couples find themselves facing the end of the marriage and a mountain of debt, however, whether they file for divorce or bankruptcy first can have some significant impacts on how both cases are resolved and, consequently, on the next phase of their lives.

Below, we will point out some of the possible benefits and downsides to filing for divorce prior to bankruptcy. While every situation is different and the best moves for people will depend on the specifics of their finances/debt and their marriage/relationship with their significant other, don’t hesitate to contact Scottsdale Divorce Attorney Karen Schoenau when you need specific advice regarding the right moves to best protect your interests in divorce.

Advantages to Filing for Divorce Before Bankruptcy

Some of the upsides to proceeding with divorce before filing for bankruptcy can include that:

  • You may qualify for Chapter 7 bankruptcy following divorce – One bankruptcy option, Chapter 7 bankruptcy, allows people to discharge certain debts as long as they qualify for it by passing a means test. If you try to file for Chapter 7 when married, the income used in this test will be the combined income of you and your spouse, which could cause you to “fail” the test, making you ineligible for this option. If you file for divorce first, however, only your income will be used in the means test calculations, and this could help you qualify for Chapter 7.
  • You may proceed with Chapter 13 bankruptcy without having to deal with your ex – If Chapter 13 bankruptcy is the better option for you, filing for divorce first can still be advantageous. This is because Chapter 13 cases can take a few years (or possibly longer) to resolve and filing for divorce first means that you will not have to deal with your ex in your bankruptcy case for a few years in the future. This can be particularly important for people who are not on good terms with their ex for whatever reason.
  • You have significant property that bankruptcy exemptions won’t protect – When spouses have significant marital property that bankruptcy exemptions won’t cover, again filing for divorce first can be a good move. This is because the divorce will divide up this property, possibly meaning that the property an individual ends up with will be covered by these exemptions later.
Potential Disadvantages to Filing for Divorce Prior to Bankruptcy

Possible downsides to filing for divorce before a bankruptcy case can include that:

  • You may not be able to retain as much property in your bankruptcy case – Some Arizona bankruptcy exemptions, such as those for motor vehicles or household items, can be doubled for married couples pursuing a joint bankruptcy case. This may allow couples who pursue bankruptcy prior to divorce retain more of their marital assets (rather than having to liquidate them as part of the bankruptcy case).
  • The property division process in your divorce may be far more complicated – Another potential drawback to filing for divorce first can be that the process of dividing up the marital property and debt will be far more complicated in divorce. In contrast, those who file for bankruptcy first can typically reduce their debt (and their property holdings) significantly, which can facilitate a subsequent divorce.
  • Your divorce may end up costing you more money – Ultimately, if there are more complicated issues to deal with during the property division process in divorce (or in any aspect of the divorce), it will take longer to resolve, and longer divorce cases usually mean pricier divorces.

The bottom line when it comes to divorce and bankruptcy is that it’s best to consult with a lawyer who can review the specifics of your situation and inform you about your best options for moving forward.

Contact a Scottsdale Divorce Attorney at the Law Office of Karen A. Schoenau

For experienced representation in Arizona divorce, contact Scottsdale Divorce Attorney Karen Schoenau by calling 480-209-1918 or by emailing us using the contact form on this page.

From her offices based on Scottsdale, Attorney Karen Schoenau represents clients throughout the metropolitan Scottsdale area, including in Scottsdale, Mesa, Surprise, Maricopa County, Pinal County, Gila County and throughout the state of Arizona.

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Karen was extremely helpful setting up my petition for conciliation. She is by far the most knowledgeable attorney regarding the necessary paperwork, how to file the petition and where it has to be submitted. She listened intently when I was describing my situation and intentions. She was very responsive to my questions and request. She is trustworthy and diligent . I would recommend her to anyone having marital issues. Mark
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Very high customer/client considerate. We found Karen when we were forced to leave another Phoenix lawyer due to his bad advice and lack of interest to help us. We were in Phoenix for six days from Michigan with nothing happening but a high wasted expense. Karen and her firm took us in and solved our issue with the courts etc. in two and a half days. Karen’s professionalism with us was very cost effective/productive. If we would have found her first, we would have saved thousands of dollars. Her interest for us was very high. She returned every call. She knew every answer to our questions. She did this for us with a death in her family. She left for a funeral and made sure we were treated with the same professionalism from her firm to finish up. I recommend Karen and her firm with very high satisfaction. Our case is custody with one parent in prison. We will return to Phoenix someday with interests for the child and his parent, if needed. Karen will be our top choice. Nolan
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Karen and Bonita are wonderful!! I know that the word "wonderful" is used a lot, but the team they make and the work they did for me can only be described as WONDERFUL!! Yes there where ups and downs in my case, but that is the system and Karen along with Bonita guided and taught me as "WE" went through it together. Karen’s easy going manner and her knowledge really helped me with the emotional part of my divorce. I used the team of Karen and Bonita both times I needed to go to court with my ex and had results that were best for my little girl. Some times I did not get what I wanted, but it was what my daughter needed. Looking back at my case, I made the right choice and would do it again in a heart beat!! Jim
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Karen was extremely supportive during a very trying time in our lives. She helped me to put things in perspective and think positive when I was overwhelmed. She is very knowledgeable about the laws pertaining to grandparents rights and the rights of the parents and knew how to provide the appropriate laws pertaining to the situation we were in. I am so grateful for her expertise and guidance. She proved to be very aggressive when she needed to be but was also supportive to my and my children. I would recommend her to anyone in a similar situation. Deanna
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