Bankruptcy and Divorce
Lets take the following hypothetical situation:
Ryan and Lauren are married but soon to be divorced. Ryan is planning on moving from the marital residence in Miamisburg, Ohio, to Tennessee with his new girlfriend Jennifer. Lauren has already moved to Kettering, Ohio. Can they file a joint bankruptcy together in Dayton? Would it be better to wait and file their bankruptcy after the divorce is final?
Divorces breed bankruptcies. During the marriage there was one household with one set of expenses. Once one spouse moves out, there become two households and two sets of expenses, and divorce litigation can be very costly. Filing bankruptcy is often the only solution for people getting divorced. But how does separation and divorce affect a Chapter 7 bankruptcy or a Chapter 13 bankruptcy?
Ryan and Lauren can file a joint petition at any time during their marriage, even if they are maintaining separate residences. Filing joint bankruptcy is cheaper because saves the additional filing fee. However, most bankruptcy attorneys will not advise filing a Chapter 13 bankruptcy in anticipation of a divorce. Chapter 13 bankruptcies require that the debtors make monthly payments for 36 or 60 months. This is impractical to do if the individuals involved will no longer be married.
The timing of the two separate cases in Ohio is also important. Filing either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy will stall any existing divorce proceedings. The bankruptcy court issues what is called an Automatic Stay at the beginning of the bankruptcy that prohibits anyone from taking action on any debts. Therefore, the divorce court cannot divide the debts of the spouses until the divorce case is final or a Relief From Stay is obtained from the bankruptcy court. It is often considered preferable to file the joint Chapter 7 bankruptcy a couple of weeks before filing the divorce case, as the Chapter 7 bankruptcy does not generally take as long as a contested divorce.
A skilled bankruptcy attorney will be able to answer all of your questions about filing bankruptcy in the context of a divorce or separation. Many Dayton-Springfield area attorneys offer free bankruptcy consultation.
This post makes some good points. With regard to the timing of filing, specifically filing a bankruptcy a few weeks before filing for divorce, I imagine that you would need to have a good idea that the bankruptcy is not expected to stay open very long. It may not be advantageous for the case to stay open for a long time as the parties move on with their own lives. Do you think that there can be any issues that could frustrate the parties if assets were liquidated unexpectedly?