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Divorce and Bankruptcy: What You Need to Know

Going through a divorce can be extremely stressful, turning your life inside out in more ways than you ever thought possible. If you have to add in a file for bankruptcy, you can easily become overwhelmed. Once you have made the decision to file for divorce, you may find quickly that your finances are also greatly affected. In fact, divorce is one of the leading causes in bankruptcy cases. If you find yourself considering both bankruptcy and divorce, there are some important factors to take into consideration before you move forward.

Automatic Stay During a Divorce Case

First, you need to consider that these two processes should be handled separately. It is common practice for people to opt to file for bankruptcy prior to filing for a divorce, a decision in which there are many logical reasons. When a bankruptcy case is filed, whether it is chapter 7 or 13, what is known as an “automatic stay” is put into effect. This means that creditors must stop contacting you in an attempt to collect debt. This is effective throughout the whole bankruptcy procedure.

Automatic Stay During a Divorce Case Colorado Springs COSo let’s imagine that while this is active, you decide to also file for a divorce in which the two cases overlap. Since a large portion of divorce cases are tangled up in splitting up assets, having an “automatic stay” enforced can make it practically impossible for the family courts to divide those assets due to the fact that they are tied up in bankruptcy court. This essentially means that your divorce proceedings could be prolonged more than you’d like, causing undue emotional stress on you and your family.

Which One Should Come First?

Now that you know how filing for both divorce and bankruptcy at the same time can lead to more chaos than you may want to endure, you will need to decide which one you will want to file for first. There are a few things that you will need to consider before making that final choice. If you and your spouse are divorcing on amicable terms, it may be in your best interest to file for bankruptcy first. This allows for you both to shoulder the financial responsibility for lawyer fees. Filing before a divorce may also help to protect you both from paying on joint debt which could help on any property you own together.

Filing for chapter 7 can make divorce proceedings go more quickly due to the fact that it typically gets rid of all dischargeable debt within 3-6 months. Whereas chapter 13 typically entails a 3-5 year payment plan, meaning it can delay your divorce substantially. Just keep in mind that chapter 7 does not eliminate all debt, so you are still responsible for paying back any nondischargeable debts such as child support, student loans, alimony, taxes, etc.

When choosing to file bankruptcy and divorce, you are choosing a new chapter not only in your life but also in the lives of your ex and your family. Understanding all the aspects of these processes can help you make a more informed decision to alleviate some of the strain and stress on yourself and your loved ones.

The team of Attorneys at Berken Cloyes is here to help you through the whole process and ensure that both procedures are handled as quickly and smoothly as possible for all parties.

Call our offices today (303) 623-4357 and find out more about how we can help you transition into the next phase of your life.