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Am I allowed to file for a bankruptcy while I am divorcing?

On Behalf of | Aug 24, 2022 | Bankruptcy |

The federal bankruptcy laws do not prevent people from filing for a Chapter 7 or Chapter 13 bankruptcy in the middle of a divorce.

However, there are many reasons why someone living in the Kent area or surrounding communities might not want to do that.

It depends on a person’s situation, but usually, it is better to file for bankruptcy either before divorcing or after a divorce has been finalized.

Doing one or the other can be a very smart financial move.  After all, marriage problems and financial stress often go hand and hand.

The fresh financial start of bankruptcy can be important for a Washington resident whose marriage has legally ended or is about to.

Advantages and drawbacks

So long as they get along and can trust each other enough, it is often better for a couple going through a divorce to jointly file for bankruptcy, especially if they can qualify for a Chapter 7 bankruptcy.

For one, the process is cheaper. The couple can use one attorney and pay one filing fee.

Perhaps more importantly, a couple can protect more of their property in the bankruptcy by taking advantage of both of their exemptions.

Basically, exemptions are legal rights to keep certain property, like some equity in one’s home or their retirement savings, out of the hands of creditors.

With respect to their divorce, a couple can go through their bankruptcy to discharge most of their marital debt. They can then divide their property and any outstanding debts during their divorce proceeding.

On the other hand, a couple may want to wait until to later and each file bankruptcy separately if they otherwise would make too much income to qualify for Chapter 7.

While a Chapter 13 repayment plan can work, divorcing couples would have to remember that, among other things, a Chapter 13 would require them to work together on repaying their debts for years.

Filing for both a bankruptcy and a divorce is an option that Kent residents may wish to explore with an experienced legal professional.