Should I file for bankruptcy before or after my divorce?

Going through a divorce is a stressful journey on its own. If your divorce is accompanied by financial problems, this stress is compounded. As you go through one of life’s largest hurdles, you may also consider filing for bankruptcy protection.  Not only can this step help protect you from an unscrupulous ex who may run up debt prior to your divorce, but it can also help you make a complete fresh start with less financial worry.

Chapter 7 or Chapter 13 Bankruptcy?

The decision about when to file for bankruptcy depends on a number of factors. The answer will largely depend on whether you want to file under Chapter 7 or Chapter 13. If you qualify for Chapter 7 bankruptcy protection and really want a fresh start, filing before your divorce is a smart option. The process only takes a few months and you can save on filing fees if you file jointly.

If, on the other hand, your joint household income is too high to qualify you for Chapter 7 bankruptcy, then you should decide whether your single income would be low enough to qualify after your divorce, or alternatively, seek Chapter 13 bankruptcy protection.

Income Constraints

In Wisconsin, if the two of you make less than $57,903 and have no children, then you should qualify for Chapter 7 bankruptcy protection before your divorce. If, however, your income exceeds that amount but your single income will be less than $43,958, it would be a good idea to wait until after your divorce to file for Chapter 7 bankruptcy protection.

If your joint and single income amounts are simply too high to qualify for Chapter 7 bankruptcy protection, then you may consider Chapter 13 protect after your divorce. Why after? Because it takes three to five years for a Chapter 13 bankruptcy proceeding to come to a close. Unless you want to continue in your marriage for those extra years, then it would be prudent to wait until after your divorce is finalized to take this next step.

Relationship Status

If you and your spouse qualify for Chapter 7 bankruptcy and are on relatively good terms during the divorce process, filing for bankruptcy before the divorce is finalized can be a good thing. If things are rocky though, your spouse may hinder your efforts to settle your debt situation. You need to be able to depend on your spouse to provide financial documents and appear in court.

Asset Questions

Another big item to watch out for is the distribution of your assets. It is important to talk to your attorney about the implications of a divorce settlement on bankruptcy protection, particularly for assets held jointly.

Thinking About Divorce and Bankruptcy

If you are struggling to meet your financial obligations during your divorce, there are ways to make things easier on yourself. The experienced bankruptcy attorneys at Hanson & Payne provide you with options for seeking bankruptcy protection during a divorce. Contact us today or call (414) 271-4550 for a consultation.

Wisconsin Ranks High In Nationwide Survey Of Credit Scores

How can you improve your credit rating and borrowing power?

A new study of consumer credit scores shows improvement nationwide. In its annual “State of Credit” survey, credit services company Experian reports that the average credit score increased four points since last year, to 673.

Wisconsin scored particularly high marks, with four of its metropolitan areas ranking in the top ten in the country— Green Bay (4th), Wausau (5th), La Crosse (8th) and Madison (10th).

Better Management of Debt by Consumers Played a Role

Modest economic growth and a national unemployment rate of around 5% may have contributed to the slight improvement. While scores have gone up, so has the amount of borrowing. Average credit card balances have increased over $1000 from $4,404 last year to $5,551 this year. Still, better management of debt and payments enabled credit scores to improve overall.

According to Experian, 673 is above average, while 720 to 50 are “prime” scores, and anything beyond, “super prime.” Better scores mean lower interest rates and easier approvals when renting an apartment, signing up for phone services, or engaging in other commercial transactions.

How to Improve or Repair A Poor Credit Score

If your credit score isn’t as high as you would like, there are a number of steps you can take.

  1. Request a free credit report online. These are available from many sites. Check your report for errors and, if you find any, bring them to the attention of the credit agency.
  2. Set up reminders or automatic bill payment to avoid late payments. This can be done usually through your bank’s online payment site or through the sites of companies billing you.
  3. Try to reduce the amount you owe. While difficult, this is will yield many financial and emotional rewards. Short-term strategies, such as transferring balances to a new credit card, will ultimately backfire and worsen your credit rating.
  4. Remember that your credit history stays with you for as long as seven years. Closing your account with a company will not erase records of missed payments or collection attempts.

A Repayment Plan or Personal Bankruptcy May Be an Option

Improving credit is easier said that done. Many people may need professional advice to deal with creditors and devise a payment plan. For some, personal bankruptcy under Chapter 7 of the Bankruptcy Code or a reorganization of debt under Chapter 13 (a so-called “wage earner’s plan”) may be a necessary stage on the path to financial recovery. If you are experiencing difficulties with your credit, an attorney experienced in personal bankruptcy law can help you find the best strategy for eliminating debt and rebuilding your credit.