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Divorce and bankruptcy: A few things to remember

When money is an issue in a marriage, a divorce might be forthcoming. There is a chance that the couple will need to file for bankruptcy. At this point, you must decide if you are going to file for divorce before you file for bankruptcy, or vice versa. This is an important decision, as it can greatly impact your life after the divorce.

One of the biggest benefits to filing for bankruptcy before filing for divorce is that the joint debts will be listed as part of the bankruptcy case. This means that you and your ex won't have to hash out who is going to pay which debts. By filing for bankruptcy before a divorce, you will likely save money since there is only a single petition for Chapter 7 to file instead of two separate petitions.

When you file for divorce before the bankruptcy, you won't be stuck with the full debts from your marriage. If you don't file for Chapter 7 before the divorce, but your ex files, you will likely be held fully liable for all of the debts since they can be discharged from your ex while remaining connected to you.

Filing a joint bankruptcy petition can also save you time. If your ex files the bankruptcy during the divorce proceedings, the divorce will likely be paused as there might be some question about property division and debt settlement.

It will also double the exemption amounts that you can claim on the petition. This can help you and your ex to each have the best start possible after the divorce. For this reason, you should carefully consider how the divorce and bankruptcy will interact.

Source: The Balance, "Six Reasons to File Bankruptcy Before the Divorce," Carron Armstrong, Jan. 03, 2018

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