Which to File First: Divorce or Bankruptcy?

Making the decision to file for either divorce or bankruptcy alone can be tough, but when you’re filing for both you may be lost as to which should be filed first.  There is no exact answer to this question because one person’s situation could greatly differ from next.  Sometimes it’s more logical for a couple to file a joint bankruptcy in order to lessen the blow of dividing marital assets, other times it might make more sense to file bankruptcy after divorce for financial reasons.  Before you make the decision, consider which type of bankruptcy you are going to file.  Are you filing under Chapter 7 or Chapter 13?

Filing Chapter 7 can be a quicker process than filing Chapter 13, so it might be more appealing to those who prefer filing bankruptcy before divorce.  Under this type of bankruptcy nonexempt property will be sold and whatever payment received from the sales will be given to creditors.  Any remaining debt you have will be discharged.  Before considering this type of bankruptcy, keep in mind that you must pass a means test to qualify.  After looking at you and your spouse’s income, the court may find your incomes too high for Chapter 7.  Thus, it may be necessary to wait until after divorce.

Filing under Chapter 13 usually lasts between 36-60 months, so it might be wise to file for divorce before you file for this type of bankruptcy.   Although the amount of time this process takes can be off putting, the plus is that you can protect your nonexempt properties from being sold.  This type of bankruptcy will create a feasible payment plan for the debtor.  The payment plan will be calculated based off of your income, amount of debt accrued, and how much money is necessary for monthly expenses.

One last thing to make note of is that there are marital debts you will not be able discharge regardless of which chapter of bankruptcy you file.  Those debts include both child support and spousal maintenance.  These debts will also be the first to be paid off due to their priority over any other unsecured debt you may have.

So while you’re trying to make a decision as to whether you should file bankruptcy or divorce first, keep in mind what type of bankruptcy you’d like to file and which seems more logical for your situation.



Written by Hoglund Law

The attorneys of Hoglund law are licensed in Minnesota, Wisconsin and Ohio. Hoglund, Chwialkowski & Mrozik, PLLC is based in Roseville, Minnesota. In addition to handling cases involving bankruptcy & social security, Hoglund, Chwialkowski & Mrozik, PLLC handles faulty drugs and toxic exposure.

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