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Bankruptcy & Divorce: Does it Matter Which Order They Fall In?

Financial woes are often a top cause of conflict in a marriage, sometimes to the point that the couple decides to file for a divorce as a result of too much stress. If financial problems are serious, the couple may even consider filing for bankruptcy, which leads to the question: which comes first–bankruptcy or divorce

If you’re thinking about divorce, bankruptcy, or both, it’s important to get counsel from a skilled legal professional who can advise you of your options and the best course of action. At the Lawrence Law Office, we can help. Call our family law offices today to learn more.

What You Need to Know About Bankruptcy and Divorce

Whether you file for divorce first or bankruptcy first depends on a number of different factors, including how much debt you’re facing, the time-sensitive nature of your bankruptcy filing, what type of bankruptcy you plan to file for, and the status of your marriage and whether or not filing for bankruptcy together makes sense.

In many cases, filing for bankruptcy together as opposed to separately can be advantageous if both parties in the relationship are facing serious financial ills. If a couple files for bankruptcy together, the process can be less costly and the bankruptcy filing fees can be split amongst the couple. What’s more, the bankruptcy will dissolve the debt of both spouses. This means that by the time you get to a divorce court, there will be fewer issues to sort out and resolve. 

When Filing for Divorce First Might Make Sense

While there are definitely times when filing for bankruptcy before filing for a divorce is the smartest thing to do, there are also instances where filing for a divorce first–and making sure it’s finalized–can be advantageous. For example, if you are filing for a Chapter 13 bankruptcy, you may want to do so individually. This is because a Chapter 13 bankruptcy is a type of bankruptcy where the debtor will repay a portion of their debts over three to five years’ time–that’s a lot of time, especially if you’re no longer married to the person you filed with. On the other hand, a Chapter 7 bankruptcy can be concluded relatively quickly. 

However, simply choosing to file for a Chapter 7 bankruptcy because it’s the quicker option isn’t always possible, either. This is because in order to qualify for a Chapter 7 bankruptcy, a debtor must pass the means test--an assessment that is used to determine whether or not the debtor has too much income to qualify for a Chapter 7 bankruptcy. If you are married, you will need to consider both spouse’s incomes when doing the means test and, if you make too much combined income, you may be unable to file for this bankruptcy type.

Splitting Debts During a Divorce

Finally, one additional thing to think about is that during a divorce case, a couple’s marital assets and debts are divided. Non-marital assets and debts, on the other hand, are not subject to division. This means that if either you or your spouse has debt that is separate–such as student loan debt that was acquired prior to the marriage–the other person won’t be saddled with this debt at the time of divorce. This may affect your decision to proceed with a bankruptcy filing or wait until the divorce has been finalized and debts and assets have been divided before doing so. Note that any financial misconduct of either spouse will be considered by the court, which means that you may not be responsible for your spouse’s debts if those debts resulted from financial misconduct. The rules related to property division in a divorce can be found in Ohio Revised Code Section 3105.01. 

Call an Experienced Attorney for Help

At the Lawrence Law Office, our experienced family law attorneys know that getting a divorce is an emotional and complex process, especially if you are facing large amounts of debt and thinking about filing for bankruptcy, too. When you call our law firm, we can guide you through everything you need to know about how the division of marital assets and debts works in an Ohio divorce, as well as advise you on how to protect your best interests and what steps to take next.

If you are thinking about filing for bankruptcy or divorce and have questions about which comes first, we urge you to reach out to a legal professional before making any decisions. You can connect with our family law attorneys by calling us directly or sending us a message requesting more information. 

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