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Do You File for Bankruptcy or File for Divorce, First?

Legal Issues of Filing Bankruptcy Before or After Divorce

Divorce is one of the most painful events in an individual’s life. Usually, financial instability precedes a divorce. As a matter of fact, financial distress is considered one of the biggest causes for divorce. A married couple can divorce each other but they cannot they have. 

Orlando bankruptcy attorneys Eric Lanigan and Roddy Lanigan don’t practice family law but will consult with families, couples or individuals who are considering or trying to decide when or if to file bankruptcy before or after a divorce.

Every financial situtation varies and will have to be reviewed carefully. Lanigan and Lanigan will help walk you through the choices and options that will be faced in bankruptcy paired with a divorce.

Couples under conditions like these think of filing for both divorce and bankruptcy at the same time. But, these are extremely complicated legal issues that demand a lot of mutual understanding and trust. Many couples get confused as to when is the best time to file bankruptcy? Is it better to file bankruptcy before or after divorce?

Prior to beginning of the court proceedings, the effects of bankruptcy and divorce should be known.

Bankruptcy – Its Effect Before a Divorce

One of the benefits of joint petition for Chapter 7 bankruptcy is that the community or marital property, i.e., property owned by married couples, is placed under the bankruptcy estate and all the marital debts are washed away.

This legal process clears all doubts as to who is responsible for which debt, thus preventing any future heart burn amongst the newly crowned ex-spouses. The creditors are least bothered with your divorce decree. They will come after any one of the spouses to collect their money.

Usually couples prefer to settle all their debts before divorce is pronounced. Moreover, both  spouses save a lot of money when they file bankruptcy together because it saves them from paying separately for the court formalities, bankruptcy attorney’s fees and so on.

As soon as the bankruptcy court receives the bankruptcy petition from the couple, there is an automatic stay order for all the creditors or collection agencies to stop any sort of communication to collect the money owed to them. The divorce agreement comes into effect only when the bankruptcy judge determines all the property exemptions, for example, the current house of residence of either spouse, a part of the sale proceed of the principle car, etc.

A spouse has all the legal rights to get child support and alimony, even if divorce petition is filed after bankruptcy.

Bankruptcy – Its Effects After Divorce

As is the law, with every bankruptcy filing, there is an automatic stay on attempts for debt collection by the creditors or collection agencies.

In the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, claims of child support and alimony are listed as the topmost priorities. The debts owed and all the unpaid taxes can be repaid later in this regard.

Now, there are chances that your ex-spouse might contemplate filing bankruptcy. You can ask the bankruptcy court, not to discharge your ex-spouse from the non-support obligations and prove that it will have a more adverse effect on you than on your ex-spouse.

Property settlement in a divorce should be included in the support obligations so that they are not discharged when one of you file for bankruptcy. If you suspect that your ex is resorting to unfair means to get out of the marital debts, then you can refinance all your debts to stay clear from any further financial mess.

Get a security lien if you owe money from your spouse. Your spouse will have to pay you an amount as security money because of the debts you owe, to get the property in a property settlement. Again, you can put a stay on the discharge of any property by the bankruptcy court with this security lien.

After divorce is finalized, put an indemnification clause in the divorce settlement, in this way your spouse will be legally bound to pay the marital debts. This clause will make you eligible to claim for security money when the other spouse goes bankrupt.

There may be several factors for you to file divorce and bankruptcy at the same time but it is best to review all options with an attorney who has experience in both matters. When you come in to meet with Winter Park, Florida, attorney Roddy Lanigan and Eric Lanigan you’ll answer questions and walk through the alternatives available to you in a divorce and a bankruptcy situation.

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