Balancing divorce and bankruptcy together
Consumers in Tennessee facing both bankruptcy and divorce should carefully identify which to file for first.
Most married people in Tennessee would agree that finances can often be a source of stress for couples regardless of the strength of their relationship. For some couples, money troubles can contribute to an irreconcilable breakdown of the marriage and for others the marital problems may contribute to financial problems. In either case, people may end up facing both divorce and bankruptcy. The choice then becomes which one to file first.
What type of bankruptcy plan is right for you?
My Horizon Today suggests that one factor people should evaluate when making the choice about filing bankruptcy or divorce first is based on what type of bankruptcy plan is right for their situation.
For those consumers who may benefit most by a Chapter 13 bankruptcy, waiting until after a divorce is finalized may be the wisest way to proceed. This is because a Chapter 13 plan lasts between three and five years . This would force the couple to be financially tied for that length of time, something most people on the verge of divorce cannot successfully manage.
How many debts are joint or separate?
Nerd Wallet recommends that couples review their debts and identify how many are joint and how many are separate. Debts that were already in existence before a couple got married are likely to be the sole responsibility of one spouse. Debts incurred during the marriage may be joint if they are in both people’s names. If, however, one spouse purchased a car and the loan is in that person’s name only, the debt may not be shared.
Are there benefits to a bankruptcy before a divorce?
The Balance indicates that for couples able to file for a Chapter 7 bankruptcy can take advantage of higher exemption levels. While assets may be lost in this type of plan, debtors are allowed to keep some assets up to certain thresholds. These are called exemptions. Joint Chapter 7 bankruptcies have higher exemptions compared to single plans, allowing couples who file together the opportunity to preserve some of their assets.
Eliminating some joint debt may also simplify the process of getting divorced as there can be fewer debts and potentially even assets to split up between the spouses.
How can I make the right bankruptcy choice for me?
Before making a final decision about filing for bankruptcy in the midst of marital troubles, Tennessee residents should consult with an attorney. This will allow them to best understand the factors they should consider and give them access to guidance in making the right choice.