Failure In Marriage
One of the most compelling reasons to file for before filing for divorce is to facilitate the separation. Any couple petitioning for divorce must reach an agreement regarding the division of debts and assets. Insolvency can significantly confound this process and make dividing your assets more challenging.
When filing for bankruptcy as a married couple, whether you file jointly or separately can affect your case. Filing separately can preserve the non-filing spouse's credit rating. Individually liable debts and a spouse's portion of a joint debt may be discharged for a spouse who files for bankruptcy separately from their spouse. For couples with an unbalanced debt distribution, filing separately may be more advantageous than filing jointly. If one spouse has accumulated more debt than the other, their debts can be discharged without the non-filing spouse being exposed to the debt liability or credit impact of a bankruptcy.
For couples with more joint debts, filing jointly may provide greater bankruptcy protection than filing individually. Filing jointly as a married couple can protect more assets from seizure and liquidation than filing individually. However, you should consider whether filing for bankruptcy jointly would disqualify you from bankruptcy protection on a financial basis. If your combined income exceeds a certain threshold, you may not be eligible for bankruptcy debt relief.
Bankruptcy After Divorce
The bankruptcy procedure can confound the division of debts and assets during a divorce. In a marriage, all property is considered community property. After a divorce, any property subject to seizure may be removed from the spouse who did not file. Any non-exempt property may be seized by creditors if a divorcee files for bankruptcy, regardless of who is in possession of the property after the divorce. When bankruptcy is filed after a divorce, dividing and protecting assets is significantly more challenging.
If a debt was incurred on a joint account during the course of a marriage, both parties share equal culpability for the debt. If a divorcee receives a discharge for a jointly held debt, the non-filing spouse may be left solely responsible for the debt. These payments are not eligible for bankruptcy protection for a divorced individual who is ordered by the court to pay alimony or child support. After a divorce, one spouse's assets or wages may be seized to satisfy domestic support payments.
There are distinct advantages and disadvantages associated with filing jointly, separately, married, or divorced. Contacting a qualified bankruptcy attorney will help couples considering bankruptcy make an informed decision.
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