There are many unfortunate things in life. Not the least of which are Divorce and Bankruptcy. As if the misfortune of having either of these happen to you is not enough, sadly, often both come at you at the same time. Sometimes it is that marital problems arise because of financial problems. Sometimes it is the other way around. But the truth of the matter is that they often happen at the same time. My intent in this post is to help arm you with some tidbits of wisdom to know how to handle them when they do. My bias will be pretty self evident as you read on but I will spoil it now and tell you that you would most likely be better off filing bankruptcy together before filing divorce.
Before you decide for yourself, however, you need to have a good idea as to the answers to the following questions:
- Do you have joint debt?
- If you do, what type is it? (e.g. secured, unsecured, priority)
- What will become of the property in the divorce?
- Who might be assigned what debt in the divorce?
It may be hard to answer some of those questions right now but you need to get into that frame of mind. Which way you go with your decision of which to file first may ride on the answers.
There are also several facts that you should be aware of. They range from common misconceptions about the interplay between bankruptcy and divorce as well as issues I have had to address in my practice. First, assigning one person a debt in the divorce decree, does not absolve the other person from liability on the debt. Second, if one person is assigned a debt in the divorce decree, at least in Oklahoma, there is a question as to whether it becomes a domestic support obligation to the other party which is not dischargeable in bankruptcy. Third, problems arise most often when one person is assigned the asset in the divorce and the other person is assigned the debt that the asset is securing (I’m sure you can imagine why). Fourth, discharging a debt in bankruptcy does not protect you from civil contempt of court for not paying a debt that is assigned to you in a divorce decree. Finally, filing bankruptcy individually is usually no cheaper than filing jointly.
I am not just saying this because I primarily practice in bankruptcy and not family/divorce law but, in my opinion, it is always a safer bet to file your bankruptcy first. Since I do not charge someone more for doing a joint bankruptcy than I do for filing an individual bankruptcy it only makes sense to do it together while you are still married. The problem with this is that, if you are in the death throws of your marriage you might not be able to be in the same room with one another long enough to accomplish a bankruptcy. If that is the case than my opinion probably holds no sway in your decision. However, if you can manage to cooperate for the common good of your family, I believe, it would behoove you to at least give it some serious consideration. If you can settle some of the financial issues before signing on the dotted line to end your marriage you will have so much less left to fight about. Of course you will still have countless other issues to deal with still but you can save yourself some measure heartache by filing your bankruptcy together first.