Many of our divorce clients who also face bankruptcy and debt challenges question if they should file before or after their divorce. This is depends on your specific circumstances. Therefore, it doesn’t have a direct answer. Among other considerations is family income and whether you want to file a chapter 7 or a chapter 13 bankruptcy. Sometimes the combined family income may exceed the limit required to file a chapter 7. Or there may be certain assets that can only be kept by filing a chapter 13. This article will shed some light on the differences of filing while married and filing bankruptcy during a divorce.
Filing Bankruptcy during a Marriage
Oklahoma’s bankruptcy laws allow married couples to file together or separate. This means they can pool their assets and liabilities and wipe out debt for both spouses. Married couples are able to take advantage of certain exceptions if they file together. For example, instead of being able to keep a single vehicle, the couple will be able to keep two vehicles under the car exemption. Also, if the marriage is for several years, even separate debt they acquired prior to the marriage could sometimes be considered as joint debt making both people liable.
Other Considerations
During a divorce, it is usually more beneficial for clients to file bankruptcy before completing the divorce. Joint bankruptcies in this situation allow the couple to eliminate all dischargeable debts before negotiating the final divorce decree. This will make the property division and spousal or child support clearer. As a result, you will not need to come back and re-calculate the support amounts in the divorce after the bankruptcy files. Getting clarity on the finances and property available for the divorce negotiation after a bankruptcy occurs, will eliminate this need to renegotiate and thus, eliminate time in court.
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The Bankruptcy Means Test
If you file while married, regardless if one or both of you file, the family income is what’s used in the means test. The means test determines whether you qualify for a chapter 7 bankruptcy. If your income is too high you will be forced to file a chapter 13. Chapter 7 is the best option because it wipes out all of your unsecured debt. Unlike a chapter 13 bankruptcy which requires that you make payments on the unsecured debt for as much as five years. If you don’t qualify for chapter 7 because one spouse makes much more than the other the lower earing spouse should consider filing after the divorce.
Tulsa Divorce Attorneys
Generally a joint bankruptcy is the most beneficial choice for a couple thinking about divorce. If you are a couple seeking a divorce and possibly a bankruptcy, calling our office could be beneficial to you. We serve clients in the entire process of divorce and bankruptcy. Your first consultation is free.