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Filing For Divorce During Chapter 7 Bankruptcy Proceeding

Posted By Allmand Law Firm, PLLC || 22-May-2017

Debt and financial instability can impact all facets of your life, and can play a role in adding stress to an already rocky relationship. As such, it is not uncommon for financial turbulence to complicate a divorce After all, married couples typically intertwine their finances and enter into financial obligations they may not always be able to keep. Whatever the situation may be, and whatever the reason behind a divorce, there are a few unique issues and options to consider when bankruptcy and divorce coincide.

At Allmand Law Firm PLLC, our Dallas bankruptcy lawyers have helped individuals and families throughout the Dallas – Fort Worth area address all of their debt and financial concerns. Because these are personal matters, we often work with spouses who are considering, initiating, or in the midst of a divorce. Because we provide comprehensive service to our clients, we always make it a point to openly discuss their questions and concerns about how divorce can impact their bankruptcy, and what steps are most appropriate for them to take based on their unique circumstances.

When it comes to Chapter 7 bankruptcy, or liquidation bankruptcy, the bankruptcy process can be completed in a much shorter amount of time than in Chapter 13. Because Chapter 7 can be filed and completed in a matter of months, it is important to consider the benefits of delaying a divorce, filing jointly, getting a debt discharge, and then initiating the divorce process. Doing so can help both spouses obtain a financial fresh start as they begin their new lives.

In addition to considering the clean slate that comes with completing Chapter 7 bankruptcy before a divorce, it is also important to consider other factors, including:

  • Household income – Filing bankruptcy jointly while married can save money when it comes to filing fees and attorney fees. However, filing jointly will mean that your income is higher than if you filed independently. When your income exceeds the limits for qualifying for Chapter 7 (the median monthly income in Texas), it may prevent you and your spouse from filing for Chapter 7. Should this be the case, it may be wise to wait until after a divorce if it means qualifying for Chapter 7.
  • Property and assets – Because married couples have community property and assets, it is important to consider how they will be protected if Chapter 7 bankruptcy is filed jointly before a divorce. In some cases, spouses may be able to benefit from double exemptions, and this option can be evaluated for its benefits in your particular situation.
  • Your relationship – Divorce is a personal decision between two people, and it will have the greatest impact on your decision making process. If spouses can communicate effectively and weigh their options for filing jointly after the bankruptcy process has been completed, they may benefit from the debt discharge and other factors. However, rocky relationships could make things complicated, especially if one spouse is hostile and refuses to cooperate. Understanding the nature of your relationship and how it may affect the process is critical to helping you make a decision about whether or not you should wait to file divorce.
  • Divorce during bankruptcy – A joint bankruptcy, which can only be filed by spouses, is two bankruptcy filings merged into one. If the bankruptcy process has already been initiated and a married couple chooses to divorce, they do have the option of separating their cases. This can be done by filing a motion to “deconsolidate” the bankruptcy, which will allow each partner to make independent decisions about the course of their case. Still, deconsolidating a divorce may not always be the best option, which is why it is important to consult a qualified bankruptcy lawyer.

All relationships are unique, and every financial situation is different. Because of this, it is essential to personally evaluate your situation, available options, and how they may benefit you and your spouse should you choose to wait to file a divorce until after bankruptcy, or initiate a divorce before or during the process. Our attorneys at Allmand Law Firm, PLLC can work closely with you and your spouse to evaluate all of your available options with your unique situation, needs, and goals in mind. We can then provide the insight and counsel you need to make an informed decision, and deliver the support and representation to guide you swiftly and successfully through your bankruptcy journey.

To discuss your situation personally with a member of our legal team, do not hesitate to request a FREE financial empowerment session. Contact us today to get started.

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