Bankruptcy and divorce: the interplay

Divorce and bankruptcy are inextricably linked for many couples. .

Studies have repeatedly shown that arguments about finances are consistently a major contributing factor to divorce actions. Likewise, when a couple is dealing with seemingly insurmountable debt to the point where arguments regularly ensue, it is often wise to consider filing for bankruptcy. If you are considering both ending your marriage and filing for bankruptcy, you likely have many questions. Chief among these may be: “which should I file first?” The answer, like so many other things in the legal arena, isn’t exactly cut and dry. It actually is highly dependent upon your unique circumstances, your state’s divorce laws, available bankruptcy exemptions and other factors.

How divorce and bankruptcy intertwine

For many couples, divorce and bankruptcy go hand in hand. Either a divorce leads to bankruptcy, or the need for bankruptcy (and the ensuing stress, disagreements, tension, anxiety, etc.) – particularly if a couple tried to avoid the inevitable and struggled against the tide of debt in vain for months or years – leads to divorce.

In some ways, it’s a “which came first, the chicken or the egg?” kind of situation. Some make it through divorce – particularly if the divorce was highly contested and required protracted litigation – only to realize that the financial upheaval of establishing two households, making child support or alimony payments, paying off marital debts, trying to make the mortgage payment on the marital home without the financial assistance of a spouse, tax consequences and other related expenses have driven them to need bankruptcy protection to stop creditor harassment and escape unmanageable debt.

Others realize prior to filing for divorce that bankruptcy is going to be their best option, without even taking into account additional financial stressors that will resort from the divorce itself. This may be the result of unemployment, overwhelming medical debt due to an unexpected illness, trying to prevent foreclosure, dealing with the impact of a failed business (something all-too-common in recent years as our country has struggled to recover from the devastating recession that affected the global economy) or other causes.

Which first – divorce or bankruptcy?

If divorce hasn’t been the impetus for a bankruptcy filing, then there could be questions about the pros and cons of which complicated legal issue should be tackled first. Unfortunately, there is no “cookie cutter” answer. For some, it is advantageous for a couple to go through a joint bankruptcy filing prior to divorce in order to maximize the number and type of bankruptcy exemptions available and to get the best possible debt discharge for a wide range of marital debts. For others, going through divorce prior to filing for individual bankruptcy relief is the best possible solution.

Only you – and your experienced attorney – can decide which option is right for you. When you are contemplating both divorce and bankruptcy, having a lawyer at your side with in-depth knowledge of both family law and the bankruptcy process can be invaluable, and can give you confidence that you are taking the right steps to protect yourself. To learn more about the intersection of bankruptcy and divorce, contact Amy M. Levine and Associates. From offices in Columbus and New Albany, the firm helps clients throughout Ohio ; contact them today.

Keywords: Bankruptcy, divorce, debt, creditor harassment .