Bankruptcy Before Divorce

The ending of a marriage requires you to address all of the debts that you acquired during your marriage.  Even if you were able to handle your debts during the marriage, you might not be able to handle them after a divorce.  This is because of economies of scale; basically, it’s cheaper for two people to live together than it is for them to live separately.  This means that financial planning must be part of your divorce planning.
One question is whether you should file bankruptcy; and then, whether it makes more sense to file bankruptcy before your divorce or after your divorce.  There is no right answer.  Here are some factors to consider if you want to file bankruptcy before your divorce.

• It’s Cheaper To File Bankruptcy Together:  A married couple can file jointly; and they can pay a single filing fee and a single attorneys’ fee.  If you file bankruptcy after the divorce, you will pay twice as much because you are paying for two separate bankruptcy cases.
• You Don’t Have To File Bankruptcy Together:  Even if you are not divorced yet, you can still file bankruptcy and still reap many of the benefits of a getting a divorce after a bankruptcy is complete.  It may be to your advantage to file bankruptcy before the divorce is complete, even if your spouse does not file with you.
• It Will Simplify Your Divorce:  Washington State is a community property state.  This means that all property acquired during a marriage and all debts acquired during a marriage are share equally between the spouses.  The Divorce Petition requires you to divide the community debts.  If you file bankruptcy before the divorce, then the division of debts can be handled with ease.  This will save you time and attorneys’ fees in the divorce.
• It Will Simplify the Division of Community Property:  I have seen many Divorce Decrees that are extremely complicated because the community property division is full of offsets for debt.  By simply getting rid of the debt ahead of time, you can simplify the community property division.  This will save you time and attorneys’ fees in the divorce.
• It Will Make It Easier To Find A Family Lawyer:  If you have lots of debt that you have to pay each month, it will be harder to pay for your divorce lawyers.  Also, if you file bankruptcy before getting a divorce, your family lawyer will not be worried that you’ll file bankruptcy on their attorneys’’ fees.  This makes it easier to find a family lawyer and pay for that family lawyer.
• It Will Make The Divorce Less Stressful:  Divorce is stressful enough, without having to worry about whether bills are being paid.  It is easy for a credit card bill or a medical bill to slip through the cracks during a divorce.  Taking care of your debt before you get divorced means you don’t have to worry about your creditors.
• You Will Rebuild Your Credit Sooner:  Divorce tends to hurt people’s credit scores.  This is because it is easy for a bill to slip through the cracks and go to collections or it is easy to fall behind on bills because it is more expensive to live as a single person than as a married couple.  What many people do is get divorced, suffer through several months or years of just scraping by, and then file bankruptcy.  Then they have to wait for their credit score to rebound from the bankruptcy.  The sooner you file bankruptcy, the sooner your credit score will start to rebound.

If you want to file bankruptcy first, and then get a divorce there are a couple of requirements:

• You Have To Sign A Conflict Waiver:  You need to inform your attorney that you are planning on getting a divorce so that your attorney can prepare a conflict waiver for you.  A conflict waiver is required so that both of you understand what happens if you can’t agree on something during the bankruptcy or if you want to keep information from your spouse.
• You Need To Be Able To Be Able To Work Together:  Bankruptcy is a collaborative process.  You will need to be able to communicate and work together to prepare the bankruptcy questionnaire, meet with your bankruptcy attorney, and attend the 341 meeting of creditors.
• If You Don’t Think That You Can Work Together:  Even if you cannot work together or if there is a major conflict of interest, it is still possible to file bankruptcy before you get divorced.  You will just need to file bankruptcy on your own.

If your marriage is ending and you have more debt than you can manage, it may make sense for you to file bankruptcy before you get divorced.  Waiting to do your divorce after the bankruptcy process is complete can greatly simplify the process, reduce the stress, and reduce the costs of a divorce.s