Arizona Bankruptcy or Divorce – Which Comes First?

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The number one stress factor cited in a majority of marriages is money.

So it should come as no surprise that many divorces are either preceded by a bankruptcy or that one follows soon thereafter.

Our Mesa Chapter 7 bankruptcy lawyers know that for many, there are indications that both are on the horizon. So how does one decide what to do first?

This is where reaching out to a law firm that handles both bankruptcy and divorce can be highly beneficial. We can analyze your personal situation to determine what makes the best sense for your specific circumstances.

In some cases, a little bit of cooperation between soon-to-be-ex spouses can actually have a very positive impact for both of your credit scores post-divorce.

One of the first things that you will need to do is determine your individual liability, both as a couple and as an individual. Joint credit card and bank accounts are going to be the responsibility of both parties, regardless of who actually racked up the debt. It’s possible that with a solid divorce agreement, you might be able to work it out to where your spouse is responsible to pay for debts that are technically shared, but which were not actually yours. These might include medical bills, vehicle debt or credit card liabilities.

Keep in mind, however, that a divorce decree isn’t the end of the story. Yes, it’s binding, but the credit card companies are not a party to that case. So let’s say you have a joint credit card debt of $20,000. Divorce court mandates that your spouse must pay this debt. However, your spouse then files for bankruptcy. Both of your names are still technically on file with the credit card company. Suddenly, you are on the hook for all that debt.

When situations like this are foreseeable, it’s best to try to work them out prior to divorce. A joint bankruptcy may be able to save you both the trouble.

We are of the mindset that it is often better to file for bankruptcy first. Every case is going to be different, of course, but a Chapter 7 filing is going to wipe out your liability on your mortgage, medical bills, credit cards and other dischargeable debt. If you file jointly, you can both purge yourselves of all of it. This way, you both end up with a clean slate as you prepare to turn the page to the next chapter of your lives.

If you file for divorce after a bankruptcy, make sure that your divorce attorney knows the details of that case. What you don’t want to have happen is to have a divorce decree making you liable for debts that, as far as you’re concerned, were already legally purged by the bankruptcy court. In other words, don’t re-establish your responsibility to pay if you’ve already gone through the trouble of filing for bankruptcy.

We understand that both divorce and bankruptcy are incredibly challenging times in one’s life.

Regardless of your ultimate approach, vow not to make any further decisions until consulting with an experienced attorney.

Additional Resources:

Which to file first: divorce or bankruptcy? July 9, 2013, By Justin Harelik, Bankrate.com