Divorce and money problems often go hand in hand, the marital situation made worse due to bills piling up and harassment from creditors. So it is no wonder that couples contemplating divorce are also often contemplating bankruptcy. Debt can haunt you both during and after the divorce process, as credit companies aren’t bound by divorce decrees. They are even able to go after you for debts held jointly if your former spouse doesn’t pay.
On the positive side, both divorce and bankruptcy offer you a fresh start in life, and planning ahead can make both your bankruptcy and your divorce less complicated and more cost effective.
If bankruptcy is a possibility and you are considering filing for a divorce, it is important to consult with an attorney who can advise you of your rights and options and will develop a successful strategy.
The experienced and compassionate Ohio debt-relief attorneys at Fesenmyer Cousino Weinzimmer understand that financial problems can happen to even the most well-intentioned people. We know that divorce is difficult enough without having to worry about debts incurred during your marriage, especially those run up by your ex-spouse. We offer a free consultation to discuss your options to make sure your debt ends when your marriage does.
Chapter 7 vs. Chapter 13 Bankruptcy
Most divorcing couples file for Chapter 7, the most common type of bankruptcy; but if you do not qualify for Chapter 7, Chapter 13 may work for you.
Chapter 7 is a liquidation bankruptcy that will discharge (get rid of) your unsecured debts such as credit card debt and medical bills. It is over quickly, so it can usually be completed before a divorce.
Chapter 13 bankruptcy results in a plan that repays some or all of your debts over a three- to five-year period. Since it takes a long time to complete, you may have to file this type of bankruptcy after the divorce.
Be aware that if you file jointly, you must include your combined income in the bankruptcy. Since there are income limits to filing for Chapter 7, if your joint income is too high, then you may not be able to qualify.
What Should Come First?
Whether you should file for bankruptcy before or after a divorce depends on factors such as how much property and debt you have and what type of bankruptcy you wish to file. Since divorce issues can impact bankruptcy, it is usually best to resolve as many problems as possible before filing for divorce.
Advantages of filing bankruptcy first include:
- Costs – Since fees for filing bankruptcy are the same for joint and individual filings, filing a joint bankruptcy with your spouse before divorce saves court fees. In addition, you may be able to use the same bankruptcy attorney, which means that attorney fees will be lower than if each of you filed separately. Your divorce costs should be lower as many financial issues will already be taken care of.
- Simplification – Since married couples can file for bankruptcy jointly, all their collective debts and assets are considered together and can be handled in one proceeding. Filing for bankruptcy simplifies divorce issues regarding debt and property division, so you will have less to litigate during your divorce. By filing for bankruptcy, your responsibility to pay dischargeable debt is wiped out, so you can eliminate debts such as high-interest credit cards, car loans and underwater mortgages.
- Exemptions – Under federal and Ohio law, people filing for bankruptcy have a list of exempt items they do not have to liquidate under a Chapter 7 bankruptcy or have considered among the assets under a Chapter 13 bankruptcy. If you are still married when you file, you are allowed double the exemptions than if you were single.
- Equitable distribution – Since Ohio is an “equitable distribution” state, the court does not necessarily split debt equally in a divorce. Instead, it comes up with a formula for what is “equitable,” determining which spouse should be responsible for what debt. Some spouses may wind up with more debt and receive other marital assets to make the financial picture more equitable.
In general, if you and your spouse have co-signed for debt during your marriage, the debt is the joint responsibility of both. An exception is when one of you is just an additional cardholder on the spouse’s credit card, and only the original cardholder is responsible. By filing for bankruptcy before the divorce, some of that debt you co-signed for will be already discharged, so you no longer have to worry about it.
When Divorce Should Come First
There are times when filing for divorce first may be preferable, depending on individual circumstances. These include:
- Support — The support considerations will already be worked out. If you are going to owe a lot of support, it helps to know that amount before declaring bankruptcy, since child support and alimony are not dischargeable debts and survive bankruptcy.
- Property Division – If you can’t double your exemptions and you have more property than you can exempt in a joint bankruptcy, it may be better to file for divorce first, divide the property, and then file bankruptcy individually.
Bankruptcy While Divorce is not Finalized
If you file for bankruptcy after filing for divorce and the divorce is not yet final, there are problems that can arise. For example, if you and your spouse have joint credit card debt, you can still be liable for debt wiped out by the bankruptcy if you agree to be responsible for that debt as a condition of your divorce.
Also, bankruptcy’s automatic stay prevents transfer of property between the couple. This means there will be a temporary standstill as to division of property and debts in the divorce case, because a state family court cannot make these property decisions as long as a federal bankruptcy court has control over it. If you want to petition the bankruptcy court to allow the divorce to move forward you will face additional court costs. So, avoid filing for divorce and bankruptcy simultaneously, to avoid additional costs and delays in finalizing the divorce.
Get Help Today – Contact Us For a Free Consultation
Every bankruptcy and every divorce is unique, as financial situations, personal property and circumstances differ, and children may be involved. The seasoned and compassionate Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer know that both divorce and filing for bankruptcy are difficult and complicated. We offer a free consultation where we will evaluate your entire financial situation, make sure you are aware of all your options, and help you decide on the path to a brighter future that makes sense in your individual case. We understand what you are going through and will walk you through the process.
Delaying can only worsen your situation, so call the Ohio bankruptcy attorneys at Fesenmyer Cousino Weinzimmer today! Call one of our conveniently located office branches at 614-228-4435 (Columbus), 937-222-7472 (Dayton), or 877-654-5297 (Cincinnati) or email for your free consultation so we can determine what debt relief solutions will work best for you.