For many people, divorce can be a costly process, and beginning your new life on your own can be financially challenging. Couples who are already facing financial hardship find themselves even more stressed about how to build solid futures independent from one another, so it’s no wonder that many people consider filing for Chapter 7 bankruptcy. If you are thinking about filing for bankruptcy, you may wonder whether it’s best to file before or after your divorce is finalized. Let’s take a closer look at these options.
Understanding Chapter 7 Bankruptcy
First of all, it’s helpful to understand what Chapter 7 bankruptcy is and why someone would consider it. In Washington state, Chapter 7 bankruptcy is available to individuals and couples who are overwhelmed by unsecured debts (typically medical bills or credit card debts). If you have any property assets, it is turned over to a trustee, who proceeds to turn this property into cash that then goes towards paying the creditors. If there is no property, or if the assets are exempt, you will simply pay a filing fee and you will be released from paying the unsecured debts. In many ways, Chapter 7 bankruptcy gives you a “clean slate” to start anew. Remember, however, that the bankruptcy filing will remain on your credit report for ten years, so there will still be a few lasting consequences. Overall, however, Chapter 7 bankruptcy is designed to help you move forward with your life while implementing more responsible financial practices.
Filing Before Your Divorce is Finalized
Since Chapter 7 bankruptcy takes effect relatively quickly (usually within a few months), many couples decide to file for bankruptcy before they head towards a divorce. While you are still married, you can file for bankruptcy together, which may allow any jointly owned possessions or property to remain more securely protected. For instance, a couple who files together could double the amount of the exemption they would receive if they had filed independently.
Pursuing Chapter 7 Bankruptcy After Your Divorce
It’s important to recognize that, in order to be eligible for Chapter 7 bankruptcy, you will need to look at your overall household income. If the combined income of you and your spouse is too high, you will not be able to file for Chapter 7 bankruptcy. So, if you are concerned about your financial future once the divorce is over, as you think your individual income and unsecured debts will be too much to handle on your own, you should consider filing for Chapter 7 bankruptcy after your divorce is finalized.
If you are concerned about how a divorce will impact your financial future, reach out to Stanley A. Kempner Jr. Attorney at Law today at (509) 309-8126.