Bankruptcy and Divorce; those two words when used separately can cause anxiety and a plethora of other emotions. However, when they are used together, they can be more than most people can handle.
The sad reality is that often times divorce can lead to bankruptcy, both directly and indirectly. Nobody starts off a relationship hoping that they will one day get married, then divorced. They certainly aren’t thinking that a divorce might cripple them so badly, that their only option is to file for bankruptcy as a means of survival.
Let’s start with the divorce part first; chances are if you have reached the point in your relationship, that divorce is the only viable option, then you have likely already started searching the interwebs for a good divorce attorney. Someone who is going to represent you and your needs during the final stages of your marriage. Chances are your search looked a little something like this “divorce lawyer Birmingham AL” or whatever city and state you happen to hail from.
It is definitely a good start, and while you may be one of the fortunate ones that might not be going down the rabbit hole of bankruptcy as a result of your pending divorce, those that are, need to take their search a step further. Try finding an attorney that handles both, or has someone in office that handles your other needs. It should also be noted, that the divorce and bankruptcy won’t happen at the exact same time.
Figuring out which to do first would be wise, and you can learn more about making that choice on Experian. They have a great article about the subject, and since they are a credit bureau, it might be wise to follow some of their advice.
Additionally, deciding which type of bankruptcy to file is also important. Are you trying to keep your assets, but adjust your payments? Then Chapter 13 might be the way to go. With a Chapter 13 bankruptcy, all of your debts will be consolidated, and a single payment will need to be made to a trustee that is then distributed to the creditors in your case.
However, if you are not in a position to make those types of payments, a Chapter 7 liquidation might be better. In Chapter 7, all of your debt is wiped clean. However, this also means that you no longer have your credit cards or the bulk of your assets. If a divorce is pending, determining which is the best to file is very important.
To get a good idea of the break down of bankruptcy filings, take a look at Fool.com, which has broken down data from a 5 year period. From what they have discovered that married couples and those that are divorced, file for bankruptcy at a rate that is larger than their population percentage.
If you are in the unfortunate position that you are facing both a divorce and bankruptcy, do your research. Make sure you know what it is you are facing, and find a good attorney to help you along the way.