Follow This Guide to Help You Get Informed About Filing Chapter 7 or Chapter 13 Bankruptcy During This Difficult Time
Divorce proceedings can be difficult, sad, and complex. If you haven’t been through it yourself, it’s hard to truly understand how it feels. The feelings certainly can’t be explained well in a short article.
However, an effective strategy for your financial challenges during divorce can be outlined quite easily, and that’s especially welcome when you’re dealing with plenty of other challenging aspects of divorce.
To help you navigate your financial difficulties during divorce, we’ve streamlined the most important information you need to know while you consider your options. Our Chapter 7 and Chapter 13 bankruptcy lawyers receive many questions about divorce, so we’re able to ensure you get information that’s going to benefit you the most right now.
After getting a bit of knowledge about filing for bankruptcy in Chapter 13 or Chapter 7 and divorce, you’ll be more informed about when you should schedule a free consultation with Wink & Wink. You’ll also find yourself further along in the process than most others in the same situation.
The Most Important Facts About Chapter 7 and Chapter 13 Bankruptcy and Divorce
Our Chapter 7 and Chapter 13 bankruptcy lawyers have divided this resource into sections depending on what you’re most concerned about. All divorces are different. Keep in mind that during a free consultation, we will intentionally listen to your individual circumstances and help strategize the best course of action to resolve your debt situation.
The Facts on Filing for Bankruptcy Jointly:
- Cost Effectiveness: When you file jointly, you only pay for one bankruptcy filing, which is cost effective. This strategy is often best when you and your spouse’s combined income is below the median for your household size. In this case, you are eligible for a joint Chapter 7 bankruptcy. If your income is over the median threshold, your only joint bankruptcy option may be Chapter 13. Because Chapter 13 entails a 3-to-5-year payment plan, it is typically not suited for a couple intent on divorcing.
- Easier Proceedings: Once debt is handled through chapter 7 or chapter 13 bankruptcy, dividing up property and other assets is far easier because you don’t have to fight over who pays the debt.
- Avoiding Future Liabilities: A joint filing ensures that no one is going to default on responsibilities that you share down the road. For example, if you jointly leave a debt unsettled and your spouse is ordered to pay it in your divorce, you have to depend on your ex-spouse to take care of their share of the debt. If they don’t do this, the creditor can sue you for it. While the divorce decree ordering your ex-spouse to pay gives you a cause of action against your ex-spouse if unpaid, it is not a defense to the creditor for your personal liability for the debt.
- Doubled Exemptions: Wink & Wink will share opportunities to claim exemptions when you file for bankruptcy through Chapter 13 or Chapter 7. These exemptions are doubled for couples, which can benefit both parties.
- An Act of Solidarity: While this isn’t a fact, some couples consider filing jointly as an act of teamwork between them to help both parties benefit – even in spite of their differences. It requires that you and your spouse get along well enough to cooperate through a bankruptcy proceeding, which includes sharing all assets and debts with each other.
The Facts on Filing for Bankruptcy as an Individual Before or After Divorce:
- A Savings Strategy: A couple may qualify for Chapter 7 bankruptcy when their combined income is less than the median for their household size. If their combined income is above this threshold, it is possible their individual income after divorce is less than median for their household size. For example, the median for a two-person household in Colorado is $98,365 while the median for a single person is $75,710 (these figures are as of June 2023, and they are adjusted twice per year in April and November). If you and your spouse each earn $60,000 per year, you are likely not eligible for Chapter 7 bankruptcy as a couple, but each may be eligible for Chapter 7 as individuals after divorce. In this case, divorcing prior to filing bankruptcy is likely far more cost-effective than filing a joint bankruptcy prior to divorce. This is because Chapter 7 bankruptcy is often cheaper and faster than Chapter 13, which entails a 3-to-5 year payment plan.
- When Communication Breaks Down: There are some cases where couples aren’t able to collaborate on bankruptcy proceedings, and it becomes necessary for the couple to file individually.
- Discharging Fees and Certain Obligations from Divorce: Filing for bankruptcy after divorce may allow you to discharge fees related to the divorce itself. While liability for a divorce decree cannot be discharged in Chapter 7, the fees owed to your own attorney may be discharged. And you can get a discharge on liabilities which are not domestic support obligations in Chapter 13 bankruptcy. For example, you can get a discharge on obligations to pay your ex-spouse for property settlement in Chapter 13 bankruptcy.
- Deducting Domestic Support Payments to Reduce Disposable Income: If your income is over the median for your household size after divorce, you can deduct domestic support payments (i.e., child support, alimony and maintenance) from your income. This means that the liability from the divorce decree can help minimize the amount you have to repay creditors in Chapter 13 or even make you eligible for Chapter 7 bankruptcy.
Rely on Our Understanding Chapter 7 and Chapter 13 Bankruptcy Lawyers for a Positive Outcome in a Tough Situation
Filing for Chapter 13 bankruptcy or chapter 7 bankruptcy is something that most people don’t want to think about, especially when they’re also facing the challenge of divorcing their spouse.
We understand this at Wink & Wink, and we want to help you get through this difficult time. We can provide a debt solution that provides a glimmer of hope for the future.
Our Chapter 7 and Chapter 13 bankruptcy lawyers are here to help you through the process of filing for bankruptcy to find more financial freedom, even with your relationship’s less-than-ideal circumstances.