Navigating Bankruptcy & Divorce: Insights From the Law Offices of Wenarsky and Goldstein, LLC
Understand the complexities of filing for bankruptcy and divorce at the same time in this guide by the Law Offices of Wenarsky and Goldstein, LLC.
Dealing With Bankruptcy and Divorce: Legal and Practical Considerations
Bankruptcy is a legal process through which individuals and businesses who cannot pay their debts can restructure or eliminate them and get financial relief.
Divorce, on the other hand, is the legal and permanent dissolution of a marriage by a court or other appropriate entity.
At first glance, both concepts are unrelated. However, when marital strife meets financial distress, they intertwine because they are the legal mediums through which the parties involved can get a fresh start. However, when they occur simultaneously, the court proceedings in either case can affect the other, which could, in turn, significantly affect the results expected by the parties.
If you’re in such a situation and you’re considering divorce and bankruptcy at the same time, it is important that you seek professional legal help to determine a proper course of action.
Our competent bankruptcy lawyers can help you understand your legal options and position from a bankruptcy perspective and help you carve a path forward that aligns with your best interests. To learn more, please keep reading.
Can You File for Bankruptcy and Divorce at the Same Time?
Bankruptcy proceedings take place in designated federal bankruptcy courts. Divorce, on the other hand, is a state law affair, and the court process will take place within the New Jersey state court system.
Ordinarily, federal and state courts operate differently, and cases in one do not usually affect the other. However, when bankruptcy is involved, this separation may be affected.
One of the benefits of bankruptcy is that it automatically stops or stays all legal actions that could lead to the loss of assets for the debtor or bankruptcy petitioner. Since divorce, in many cases, involves the division of marital debt and assets, the automatic stay could cause the divorce case to be placed on hold until the bankruptcy ends or until the bankruptcy court lifts it.
From a practical perspective therefore, filing for divorce and bankruptcy at the same time may be inappropriate since it could complicate the divorce proceedings.
Filing for Bankruptcy Before Divorce: Benefits and Considerations
Since timing is crucial, you may be wondering if it is better to conclude your divorce before filing bankruptcy. The answer to this question varies and depends on your unique circumstances.
Filing for bankruptcy before divorce does make sense in certain instances.
For example, if you and your spouse have joint debts, filing a joint bankruptcy petition could be more effective (with less legal fees) than an individual petition. A joint petition can help eliminate any joint debt that would ordinarily have been split during the divorce process. This helps to reduce the issues to be decided in divorce court, potentially reducing the duration of the case.
Also, filing bankruptcy first could simplify marital asset division during divorce since both parties would have less to divide.
However, in deciding whether or not to file a joint bankruptcy petition before divorce, it is paramount to consider the type of bankruptcy for which you qualify and the duration.
For example, Chapter 7 bankruptcy, also known as liquidation bankruptcy, can help eliminate unsecured debts. This type of bankruptcy is typically completed in a few months, so couples might find it a swift path to resolving debt. However, to qualify, debtors must pass the means test, which could be difficult to achieve when the incomes of both spouses are considered.
Chapter 13 bankruptcy, in contrast, involves a repayment plan spanning 3 to 5 years. While this might offer a structured approach to debt settlement, it also could keep spouses financially interlinked for a longer period, potentially hampering efforts for a fresh start even after divorce.
Ultimately, every case is different, and the decision to file bankruptcy before a divorce must be carefully considered, taking into account the types of debts owed, the income and assets of both spouses, and the desired timeline for both the bankruptcy and the divorce proceedings.
Filing for Divorce Before Bankruptcy: When Is it a Good Idea?
Filing for divorce before bankruptcy can make sense in certain instances.
If you and your spouse simply cannot get along, it might be more practical and perhaps essential to your overall well-being to tidy up that aspect of your life before focusing on your finances.
Dealing with the divorce process first could be more beneficial if you and your spouse cannot qualify for a Chapter 7 bankruptcy because your joint income is too high. After the divorce, you are more likely to pass the means test to qualify for a Chapter 7 bankruptcy with your income alone (depending on how much you earn).
When one party has to pay alimony or child support, determining those issues during divorce could help the individual correctly calculate their disposable income for bankruptcy purposes.
Because of the complexities involved, deciding whether to file for divorce or bankruptcy first and vice versa can be difficult. In this critical moment, seeking legal counsel from an experienced bankruptcy attorney is important to help you make informed decisions.
The Law Offices of Wenarsky and Goldstein, LLC: Your New Jersey Bankruptcy Attorney
At the Law Offices of Wenarsky and Goldstein LLC, we understand the crippling effects and the feelings of helplessness when you are unable to pay your debts. Pairing this with the difficulties of divorce can be too much to handle alone. But you don’t have to be alone.
Our bankruptcy attorneys are adept at unraveling the legal knots that occur when divorce and bankruptcy filing coincide. We can guide you through these difficult times and help you find appropriate solutions that would help set you on the path to debt freedom.
With our extensive bankruptcy experience, we can evaluate your current financial circumstances, determine your eligibility for the different types of bankruptcy, and help you devise a suitable debt relief strategy despite your divorce.
We consider your success ours and would gladly help you navigate the intricacies of your bankruptcy case.
Contact Us Today
The decision to file for bankruptcy, especially during a divorce, presents a myriad of legal challenges. Timing is especially crucial, as both cases can impact each other.
For the best results, it is paramount to have legal guidance before making any decisions.
Our experienced team at the Law Offices of Wenarsky and Goldstein, LLC, can guide you and help you discern the right course to secure a more stable financial footing.
Contact us today to book a consultation. Let us help you find your way to debt relief.
Call the Law Office of Wenarsky & Goldstein
At the Law Offices of Wenarsky & Goldstein, LLC, our New York and New Jersey attorneys are experienced and knowledgeable in bankruptcy, estate planning and probate, guardianship, special needs planning, and real estate law. To learn more about how we can assist you with your legal needs, call us today at 973-453-2838.
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