A divorce is stressful enough, and adding financial difficulties to the mix only complicates matters. One question that often arises is whether you can file for Chapter 7 bankruptcy while your divorce is ongoing. For divorcing couples, it’s wise to be aware of how these two legal processes can interact.
How Chapter 7 bankruptcy works
Chapter 7 bankruptcy allows individuals to discharge most of their unsecured debts. This process involves the sale of non-exempt assets to pay creditors, followed by a discharge of remaining debts.
Impact on marital property division
Filing for Chapter 7 bankruptcy during a divorce can affect how courts divide marital property. Once an individual files for bankruptcy, an automatic stay goes into effect, which temporarily halts most collection actions. This stay means that the bankruptcy court will take control of your property, which could delay the division process in your divorce.
Potential benefits and drawbacks
There are both benefits and drawbacks to filing for Chapter 7 during a divorce. On the one hand, discharging debts through bankruptcy can simplify the divorce by reducing financial issues. Then again, the timing could complicate the division of assets and lengthen the divorce process.
Key considerations before filing
Before filing for Chapter 7 bankruptcy during a divorce, it’s important to consider the potential effects of both legal processes. You might find that handling one legal issue at a time provides a clearer path forward.
Timing matters
Filing for Chapter 7 bankruptcy in the middle of a divorce is possible, but it requires careful consideration. Whether it’s better to file for bankruptcy before, during, or after your divorce depends on your unique situation. In any case, understanding the potential impacts is the first step in making an informed decision.
