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.
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.
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.
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.