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Filing for Divorce during a Bankruptcy

Posted by Chris Peterson | Mar 30, 2015 | 0 Comments

Filing for Divorce during a Bankruptcy

Filing for Divorce during a BankruptcyMany marriages end because of financial problems. A married couple may find themselves in the position of needing to file bankruptcy but planning to file for divorce as well. This idea may seem to have merit, but divorce and bankruptcy are different legal matters and it can be difficult to file both at the same time without causing unforeseen difficulties. Because bankruptcy can be very complex, it is generally in your best interests to work with a Bryan bankruptcy lawyer.

Deciding whether Filing Chapter 7 or Chapter 13 Is Appropriate for Your Situation

If you and your spouse have the option of filing either a Chapter 7 or Chapter 13 bankruptcy, the former is likely in your best interests if you plan to divorce. This is because a Chapter 7 can be discharged in a matter of a few months, whereas a Chapter 13 is not discharged for several years. However, if you try to file for divorce while a bankruptcy is in process, your Bryan bankruptcy attorney may be caught in a conflict of interest and need to withdraw from the case.

Filing a Chapter 7 total liquidation bankruptcy is often not possible for a couple where both are contributing substantial salaries to the household. In such a case filing a Chapter 13 debt reorganization is the only option. If you divorce, your household income will significantly diminish, and each of you may then be able to qualify for a Chapter 7. One option is to file a Chapter 13 initially, and then after the divorce is final, convert your bankruptcy to a Chapter 7. In order to do this, however, you would need to petition the bankruptcy court to separate your case into two.

Payments Ordered by the Divorce Court and Bankruptcy

Many of the matters handled in divorce court can be handled without interference from the bankruptcy filing, but transfer of property is not one of these. The problem is that assets are held by the bankruptcy trustee until such time that the bankruptcy is complete. You cannot, for instance, finalize an agreement to purchase the home from your spouse until the bankruptcy court determines whether or not to take the home as part of a Chapter 7.

How to Avoid Difficulties if You Divorce and Go Bankrupt Simultaneously

Because both divorce and bankruptcy are separate legal issues handled in different courts, you are likely to run into a number of difficulties should you decide to file for both at the same time. Working with a strong attorney is essential. Call Peterson Law Group to arrange a consultation at 979-703-7014 or 936-337-4681.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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