By themselves, both bankruptcy and divorce can be challenging situations. When you consider going through both at the same time, the thought can be overwhelming.
However, developing an understanding of how the two processes relate to each other may aid in navigating through them. There are a few important factors in regards to bankruptcy proceedings during a divorce.
Individuals and families usually utilize either a Chapter 7 or Chapter 13 bankruptcy. Depending upon the situation, one or the other bankruptcy type may be beneficial to the filer’s divorce situation. Generally speaking, those with a high amount of assets may choose a Chapter 13 bankruptcy. This is still true during the course of a divorce, especially considering that naturally combining the assets of two individuals will usually amass to a good amount. Similarly, two people may have an excessive amount of debt combined, which may be grounds for a Chapter 7 bankruptcy.
The timing of the bankruptcy filing can affect the divorce proceedings. If divorce proceedings are ongoing and a party, or both parties, chooses to file for bankruptcy, the divorce must go on hold until the bankruptcy is complete. This is so the court has the chance to evaluate assets and income parties will have after the divorce.
Tax filing status
Similar to the bankruptcy type, the amount of assets can play a strong factor in determining if a single or joint tax filing for the year would be best. A joint filing doubles the number of exemptions and assets the two can claim, so those with a high level of assets may find it useful. When one party is responsible for most of the debt and there are few assets, a single filing may be appropriate. It may also be beneficial to gain an understanding of tax laws in relation to bankruptcy in general.
By gaining knowledge of these key factors in regards to bankruptcy in relation to divorce, you may be able to make an educated decision about your personal situation. Take some time to consider these aspects and review the related laws to decide your best course of action.