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Divorce and Bankruptcy
Avoid These Common Mistakes When Filing Bankruptcy and Getting Divorced
One of the most common reasons that married couples divorce is because of financial issues. These couples can turn to bankruptcy and divorce, legal procedures to dissolve both their debts and their marriage. If you are considering filing for both, you need to understand how bankruptcy and divorce interact under your personal circumstances.


When To File
Avoid filing Chapter 13 bankruptcy if you know you want a divorce in the near future. Which should you file first, bankruptcy or divorce? This can depend on a variety of factors, the first of which being the chapter you choose to file. Most personal bankruptcies are filed under either Chapter 7 or Chapter 13 of the Bankruptcy Code. Chapter 7, which is only available to those under certain income levels, liquidates debts without repayment. Chapter 13 reorganizes debts into a payment plan that lasts either 3 or 5 years.

Some filers may qualify for Chapter 7 bankruptcy, but choose to file Chapter 13 bankruptcy anyway. This is because Chapter 13 allows those who are behind on payments like their mortgage and car loan to catch up over those 3-5 years and keep the asset as well. It can also be used for priority debts like child support and spousal maintenance, which can’t be discharged in Chapter 7 and can garnish your wages at a much higher rate than typical debts. The Chapter 13 plan will be based on your income at the time the petition was filed. This can make filing a Chapter 13 while still married tricky. Your payment plan will be based on your combined income, so unless your spouse doesn’t work, affording the payments that are calculated on a dual income will be nearly impossible. Chapter 13 plans will leave you with very little disposable income at the end of each month- definitely not enough for one spouse to go out and rent a new home. Divorcing will become exponentially more difficult for the 3-5 years the payment plan lasts.

Filing Chapter 7 Before a Divorce
Avoid paying costs for two separate bankruptcies if you can wait a few months to file divorce. While filing a Chapter 13 bankruptcy before a divorce usually isn’t a good idea. However, Chapter 7 BK is a much faster process, and filing it before divorce can have many advantages. One of these is that it reduces the amount of time you will need to spend on property division in the divorce. Arizona is a community property state, so both assets and debts that were acquired while the couple was married will be split evenly if they divorce. One spouse may agree to pay more than their fair share of the community debts in exchange for keeping valuable shared assets like the marital home, pets, furniture, and vehicles acquired during the marriage. However, if the spouse who agreed to paid debts later discharges them through Chapter 7 bankruptcy, the creditors may still pursue the other spouse for payment. If the couple files Chapter 7 while they are still married, the debts will be discharged as to both of their names. This also saves time (and hourly attorney’s fees) on asset division during a divorce.

Filing Chapter 7 After a Divorce in Arizona
Avoid filing for Chapter 13 bankruptcy if you would qualify for Chapter 7 after you divorce your spouse. While filing bankruptcy while still married can save a married couple time and money, it is still sometimes better to wait until a divorce is finalized to proceed with a Chapter 7 bankruptcy. There are strict income limits for Chapter 7 filers that may be easier to meet when the spouses are no longer married.

Do I Need an Attorney?
Avoid proceeding with a bankruptcy or divorce unrepresented. You should always at least consult with an attorney before proceeding with a legal matter, even if you end up choosing to represent yourself. Many attorneys offer consultations at no cost to you. You should also consider consulting with a full service law firm, meaning it handles many types of cases, including bankruptcy and family law. These attorneys are best equipped to help you strategize the timing of your divorce and bankruptcy. They will also help you confirm which chapter/s of bankruptcy you qualify for.

If you need help with bankruptcy, divorce, or both, our office is here for assistance. We offer free phone consultations in both types of cases, as well as reasonable attorney’s fees and payment plan options. The best legal representation doesn’t have to break the bank- learn for yourself by scheduling your free consultation today.



For further information, visit our website or schedule a FREE CONSULTATION with an attorney experienced in Arizona divorce who can help you navigate the legal process if you also need to file bankruptcy.
www.azfamilylawlawyer.com
(480) 263-1699